Dollar gains after Powell’s speech; euro retreats
The U.S. dollar edged higher Wednesday after Federal Reserve Chair Jerome Powell struck a cautious tone on further easing, while the euro failed to take advantage of positive Ukraine headlines.
At 03:50 ET (07:50 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher to 97.080, bouncing after earlier losses.
Powell remains cautious
Powell broadly reiterated his cautious stance over further easing at a speech to Rhode Island’s Greater Providence Chamber of Commerce on Tuesday, saying that the central bank is in a "challenging situation" with an ongoing risk of faster-than-expected inflation at the same time that weak job growth has raised concern about the health of the labor market.
Powell offered little indication of when he thinks the Fed might next cut interest rates, noting that there was danger to both cutting too fast and risking a new surge of inflation, or reducing rates too slowly and possibly causing unemployment to rise unnecessarily.
The Fed cut interest rates earlier this month for the first time this year, and markets are priced for quarter-point rate cuts at each of the remaining two Fed policy meetings this year.
“Fed Chair Jerome Powell broadly reiterated his cautious view yesterday, signalling there is some balance between downside employment risks and upside inflation risks. The result is still a more hawkish tone by the chair relative to the FOMC consensus, as expressed by the median Dot Plot,” said analysts at ING, in a note.
In Europe, EUR/USD traded 0.2% lower to 1.1794, with the euro slipping slightly lower despite more bullish comments regarding Ukraine’s position in the war with Russia by U.S, President Donald Trump.
GBP/USD traded 0.3% lower to 1.3487, heading back towards last week’s two-week low.
Elsewhere, USD/JPY rose 0.3% to 148.10. The BOJ left policy unchanged last week, but a number of hawkish signals spurred analysts and investors to speculate on an earlier resumption of rate hikes.
The Reserve Bank of Australia reduced interest rates in its last meeting and signaled more cuts if the incoming data supported the move. However, Wednesday’s data showed inflation reaching the top of the RBA’s target range, stoking concerns around future central bank moves.
Source: investing.com
