Dollar Strengthens, Fed Sends Two-Way Signal
The US dollar extended its gains on Wednesday (February 18th) after the FOMC meeting minutes confirmed a more "cautious" policy tone and no longer a one-way bias. The dollar index (DXY) stood at 97.68, up around 0.6%, marking a consecutive gain and taking the USD to its highest level in a week.
The main catalyst came from the minutes: some policymakers considered that an interest rate cut would still be reasonable if inflation fell as expected. However, the document also indicated that the Fed's reaction function remained flexible—some participants said that future decisions needed to be framed more "two-way," including the possibility of a rate hike if inflation remained above target.
In Europe, the euro was also pressured by political and policy rumors: reports suggested that ECB President Christine Lagarde could step down early, although the ECB emphasized that no decision had been made regarding her tenure. The combination of ECB rumors and a stronger USD sent EUR/USD down to 1.1786, or around -0.57%.
The pound also weakened amid speculation of BoE easing after weak UK data; GBP/USD was at 1.3500, down around 0.43%.
In Asia, the dollar's strength was most pronounced against the yen: USD/JPY rose to 154.80, or around 0.91%, while AUD/USD weakened to 0.7047, or down around 0.56% as flows returned to the USD.
Meanwhile, the dollar also strengthened against the Canadian dollar: USD/CAD was at 1.3699, up around 0.45%, as markets weighed the outlook for Canadian interest rates and the direction of upcoming US data. Market participants' focus now shifts to a series of upcoming data, particularly PCE inflation and growth data, which could determine whether the dollar's strength continues or begins to lose steam.
Source: Newsmaker.id
