On Wednesday , the dollar recovered its footing and edged higher as a series of Federal Reserve speakers left the door open to more rate hikes, as traders awaited Chair Jerome Powell’s speech on the central bank’s future policy course.
The greenback has found a floor after falling last week in the aftermath of the Fed’s decision to hold its policy rate steady and on data indicating a cooling U.S. labor market, as markets remain divided over whether a peak in U.S. rates has been reached and how soon the Fed could begin easing monetary conditions. According to the CME FedWatch tool, futures are pricing in a 15% possibility of another raise by January, but a 22% chance of rate decreases as early as March.
The British pound, which had earlier this week reached a seven-week high versus the dollar, was last trading at $1.2286. After a brief reprieve last week, the Japanese yen fell again below 150 per dollar. It was last worth $150.56 per dollar. The US dollar index, which fell by 0.03% to 105.57 last week and was on course for a weekly gain, increased by 0.03% to 105.57.
On Tuesday, a number of Fed members kept a cautious tone, saying they are examining solid economic statistics, signs of a downturn, and the impact of increased long-term bond yields to determine whether they will need to raise rates further to reduce inflation.
The focus now shifts to Fed Chair Powell’s remarks later on Wednesday. “There is a risk that the US dollar will strengthen further today if Powell and (company) continue to remind markets of their ‘higher for longer’ narrative,” Simpson, senior market analyst at City Index stated.
The euro sank 0.07% to $1.0691, pushed down further by a bleak prognosis for eurozone development. According to data released on Tuesday, German industrial production declined more than predicted in September. “Regardless of whether the euro zone falls into recession, we see enough growth headwinds to suggest that the European Central Bank’s monetary tightening is done,”said Wells Fargo economist Nick Bennenbroek.
Down under, the Australian dollar was struggling at $0.6425, having fallen 0.8% in the previous session, its worst daily drop in over a month. The Reserve Bank of Australia (RBA) hiked interest rates to a 12-year high on Tuesday, capping off four months of stable policy, but softened its tightening tendency to make it more dependent on incoming data.
The New Zealand dollar dropped 0.12% to $0.5928.
Please note that this article does not offer any instructions or suggestions regarding investment decisions. It is important for you to conduct your own research or seek professional advice from a qualified professional before conducting an investment decision.