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09/07/24
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USD Higher Before Powell Testimony
On Tuesday, the U.S. dollar inched up in early trade in Europe and bounced off its lowest level in a month before Fed Chair Jerome Powell’s testimony to the Senate.
The U.S. dollar index, which measures its strength against 6 other major currencies, traded at about 104.737, up 0.1% and slightly higher just than the overnight low of 104.622.
Although the dollar bounced slightly on Tuesday, it stayed on the back foot after Friday’s weak jobs report and before Chair Powell’s two days of testimony before Congress, starting later today with the Senate and followed on Wednesday by the House.
According to the CME Group’s FedWatch Tool, there is growing confidence that the Fed would implement the first rate cut in September, with traders currently seeing a chance of about 76% of a rate cut then, up from 66% the prior week.
Analysts at ING said in a note they stood by their view that if there was a deviation from the current narrative, it should be dovish, as Powell may see the revisions to the June Dot Plot as too hawkish and want to tweak communication after recent data.
There will be more cues over the likely path of U.S. interest rates later in the week, with the release of Thursday’s consumer inflation data.
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