The US dollar rose during trading on Wednesday after rebounding from its lowest level in three weeks. This recovery came after cautious statements made by Jerome Powell, Chairman of the Federal Reserve (US central bank), regarding how close US interest rates are to be cut.
Jerome Powell’s Statements On the first day of his testimony before Congress, Powell stated that an interest rate cut would not be appropriate until the central bank gained “greater confidence” that inflation was heading toward its 2% target rate. He pointed out that expectations regarding a rate cut are still uncertain and that more economic data is needed to ensure this decision.
The impact of the statements on the dollar These statements led to a rise in the dollar, as investors considered that the Federal Reserve may be less inclined to cut rates in the near future. This comment from Powell reduced expectations of a rapid rate cut, giving additional support to the dollar in global markets.
Economic Context These statements come at a critical time, as investors are closely monitoring US economic data to see whether inflation will move towards the target rate. Expectations of a rate cut had contributed to the dollar falling to its lowest level in three weeks, but Powell’s cautious comments restored some confidence to the market.
Future Outcomes The outlook remains unclear, and it will be important to monitor future certifications and upcoming economic data to gain a clearer view on the future directions of US interest policy.
So, the recovery of the dollar after Jerome Powell’s statements indicates the markets’ sensitivity to the monetary directions of the US Central Bank. There is still uncertainty regarding a rate cut, and the Federal Reserve appears to be waiting for more economic data before taking any decisive steps.
US Dollar Index Stabilizes Amid Rate Cut Expectations
The dollar index, which measures the performance of the US currency against six major currencies, including the euro and the yen, stabilized at 105.14 points, after rising by about 0.1 percent on Tuesday. It fell on Monday to its lowest level since June 13 after unexpectedly weak US jobs data.
A price outlook for the dollar: The dollar index, which measures the performance of the US currency against six major currencies, including the euro and the yen, stabilized at 105.14 points, after rising by about 0.1% on Tuesday. It fell on Monday to its lowest level since June 13 after unexpectedly weak US jobs data.
Traders currently see a 73% chance of interest rates being cut by September, down from 76% the day before. Expectations indicate that another cut will likely be made by December. After his testimony before the Senate, Powell is expected to speak before the House of Representatives later Wednesday.
From the economic data, the consumer price index data for June is scheduled to be released on Thursday, which will be a major indicator of inflation trends in the coming period. Traders currently see a probability of approximately 73 percent for interest rates to be cut by September, down from 76 percent the previous day. Expectations point to another cut, most likely by December.
After his testimony before the Senate, Powell will speak before the House of Representatives later on Wednesday. June CPI data is scheduled to be released Thursday. The dollar rose 0.13 percent to 161.525 yen. The euro settled at $1.0815. The Australian dollar fell 0.1 percent to $0.67345 but is still hovering near the highest level in six months recorded on Monday at $0.67615.
Weekly fundamental forecast for the US dollar
The US dollar fell to its lowest level since June 13 after unexpectedly weak US jobs data. On the first day of testimony before Congress yesterday, Federal Reserve Chairman Jerome Powell stated that a rate cut would not be appropriate until the Fed gains “greater confidence” that inflation is heading toward its 2% target rate.
Last month, the single currency (the euro) came under pressure after calling for early elections in France, but it has been able to recover some of those losses since then. However, investors remain wary of potential political deadlock in the country.
Weekly Fundamental Forecast for the US Dollar Asset managers expected that Fed Chairman Jerome Powell would signal a cut in interest rates in his speech to the Congressional Banking Committee and thus opened long positions on Treasuries since July 1, resulting in the EURUSD pair being almost inactive.
Jerome Powell did not indicate in his speech that the start of monetary easing was imminent, as the rise in the jobs index did not impose inflationary pressures on the economy, and Federal Open Market Committee officials had long indicated that a rise in the jobs index might lead to a decline in the consumer price index. Surprisingly, shortly afterwards, US Treasury Secretary Janet Yellen repeated Jerome Powell’s statements almost verbatim, believing that a rise in the jobs index would no longer lead to a rise in the US inflation index.
Weekly plan for trading the EURUSD pair Investors decided to wait for the June CPI report. Only progress in the fight against inflation can help EURUSD bulls regain control. the price could break the resistance level at 1.0835.
