Dollar pauses as Fed speakers suggest caution on rate cuts
The U.S. dollar held steady on Tuesday as investors paused to digest hawkish comments from Federal Reserve officials, while awaiting remarks on the economic outlook from Chair Jerome Powell.
The greenback continued its recent see-saw pattern, easing overnight after three sessions of gains on Monday, with the U.S. dollar index last at 97.34.
The euro was a touch lower at $1.1795 while sterling fell as much as 0.2% on the day to a session low of $1.3488 immediately after a survey showed British business activity slowed in early September, before tracking back to around $1.35.
Investors are assessing the impact of U.S. President Donald Trump's economic policies on the health of the global economy and the implications for Fed policy ahead of the release of core personal consumption expenditures (PCE) data later this week.
Powell will speak on Tuesday, and his comments could influence interest rate expectations amid mixed signals from the Fed, with some officials favoring gradual cuts to control inflation.
It does not seem likely that Powell will "diverge much from last week's press conference comments, and we think markets may be more interested in hearing other FOMC (Federal Open Market Committee) members' opinions at this stage anyway," said Francesco Pesole, FX strategist at ING.
Money markets are currently pricing in a near-90% chance of a rate cut in October, down slightly from 92% a day earlier, per CME's FedWatch tool. Congressional funding talks this week to avert a government shutdown on September 30 have added to market jitters.
Against the yen, the dollar was flat at 147.73 yen but weakened 0.4% against Sweden's crown to 9.31 after the central bank lowered interest rates to 1.75% but said rates were expected to remain on hold for some time.
Source: Reuters
