Dollar hits nearly two-week high as stocks wobble; pound slides after BoE holds

NEW YORK/LONDON, Feb 5 (Reuters) – The U.S. dollar hit a nearly two-week high on Thursday as fresh volatility gripped stocks and the pound tumbled after a razor-thin Bank of England vote left UK rates unchanged.

The greenback found firmer footing this week as investors turned more risk-averse and financial markets assessed U.S. corporate earnings season, now halfway complete.

The dollar largely stayed range-bound after a run of softer U.S. labor data, including jobless claims rising more than expected and unexpectedly low job openings in December.

“My sense is that we are still consolidating, going broadly sideways,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

The dollar index, which measures the U.S. currency against a basket of six others, was last up 0.17% at 97.85, rising for a second day. It rose to its highest since January 23 earlier in the session.

Gold and silver, which have become more volatile as a result of leveraged buying and speculative flows, were rocked by a fresh selloff on Thursday. Silver fell more than 13% to $75.94.

The Nasdaq Composite has fallen 2.9% over the past two days, its biggest slide since October, with volatility triggered by market bellwethers including Google parent Alphabet, which reported aggressive spending plans on Wednesday, and a rout in software stocks as they adapt to a new era of generative AI.

CLOSE CALL FROM BANK OF ENGLAND

Sterling was last down 0.92% against the dollar at $1.3527 and off 0.73% versus the euro, after the BoE left borrowing costs unchanged in a 5-4 split among the nine policymakers that make up the central bank’s rate-setting committee.

The pound, which fell to a two-week low, has been under intense pressure all day from concern about the stability of the UK government and whether Prime Minister Keir Starmer could survive the fallout from his decision to appoint Peter Mandelson as U.S. ambassador despite knowing about his ties to Jeffrey Epstein.

“The market was not prepared for a 5-4 split from the committee, which has been taken as a sign that another rate cut from the BoE could come as soon as next month,” said Jane Foley, head of FX strategy at Rabobank London.

“The GBP is also vulnerable on the back of political concerns. It was always likely that the PM could be fighting for his job after the May local election. Now it seems that a leadership challenger could come earlier.”

The European Central Bank also delivered no change in interest rates at its policy meeting on Thursday, and the euro was last down 0.15% at $1.1789.

Markets show traders see little chance of an ECB rate cut this year. Even with the volatility that has dominated markets since the start of the year, the euro is only some 0.4% above where it was when the ECB last met in December.

However, the euro is 13% higher against the dollar than it was a year ago, which has added to concern among policymakers about the impact on regional price pressures, while inflation in the euro zone has fallen to around 1.7%, below the ECB’s target of 2%.

Cryptocurrencies extended losses, with bitcoin hitting its lowest since November 2024. Bitcoin fell 7.07% to $67,492.39. Ether was down 7.66% at $1,963.08.

(Additional reporting by Gregor Stuart Hunter in Singapore; Editing by Sam Holmes, Kirsten Donovan, Rod Nickel)