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03/07/24
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USD Lower After Dovish Speech by Powell
On Wednesday, the U.S. dollar retreated in European trade after Federal Reserve Chair Jerome Powell said progress was being made toward bringing inflation down.
The U.S. dollar index, which measures its strength against 6 other major currencies, traded down 0.1% at 105.287.
The dollar dropped lower after Tuesday’s comments by Fed head Powell, at a conference in Portugal sponsored by the ECB. This firmed expectations that U.S. interest rate cuts will be coming soon.
Powell said that the Fed had made progress in taking the rate of price gains back down to 2% and noted that the labor market — a major inflation driver — was showing signs of easing, with wage increases easing to more sustainable levels.
Analysts at ING said in a note, Powell sounded rather upbeat on disinflation as was expected, although he still warranted caution on the next policy moves. Markets were now pricing in 0.18% worth of easing by the Fed by Sept., and 0.45% in total by the end of the year.
The Federal Reserve will release the minutes from its June monetary policy meeting later Wednesday when the central bank kept interest rates unchanged at an over 2-decade high range and indicated that it expected to reduce borrowing costs only once this year.
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