The dollar strengthened on Thursday after the Federal Reserve signaled it was in no rush to cut interest rates further this year due to uncertainty over U.S. tariffs, while the pound remained weak after the Bank of England kept interest rates steady.

The Swiss franc weakened slightly after the Swiss National Bank cut its policy rate to 0.25%, while the Swedish crown weakened after its central bank kept rates unchanged.

U.S. policymakers project two quarter-point interest rate cuts are likely later this year, the same median forecast as three months ago, even as they forecast slower economic growth and higher inflation. On Wednesday, the Fed kept its benchmark interest rate steady at 4.25%-4.50%.

"We're not going to be in a hurry to move," Fed Chair Jerome Powell said. "Our current stance of policy is well positioned to deal with the risks and uncertainties that we face." Powell's comments and the Fed's statement underscored the challenges facing policymakers as they navigate President Donald Trump's plans to impose tariffs on imports from U.S. trading partners and the impact on the economy.

"There may not be enough Fed communication to build a new USD short," said ING FX strategist Francesco Pesole.

Traders are pricing in 63 basis points of Fed easing this year, about two rate cuts of 25 bps each and about a 50% chance of a third. Markets are fully pricing in the next cut in July, LSEG data showed.

The dollar index, which measures the U.S. currency against a basket of six peers, was up 0.5% at 103.85 but was still close to a five-month low of 103.19 hit earlier this week. The euro was down 0.5% at $1.0849.

Sterling had earlier risen to a more than four-month high of $1.3015 in early Asian hours before retreating to $1.2975.

With UK inflation firmly above its 2% target, the BoE has cut borrowing costs less than the European Central Bank and the Fed since last summer, contributing to the country's sluggish growth rate.

"In the face of the huge uncertainty weighing on the UK economic outlook, rate setters have chosen to tread cautiously," said Jeremy Batstone-Carr, a strategist at Raymond James Investment Services.

In a busy day for central banks, the Swiss franc weakened slightly against the dollar and the euro after the SNB delivered its fifth straight rate cut and said it was ready to intervene in the forex market if necessary.

"The SNB stands out from the crowd," said Kirstine Kundby-Nielsen, a forex strategist at Danske Bank.(Newsmaker23)

Source: Reuters