Dollar declines on Powell’s speech
The dollar lost value on Wednesday as a result of Federal Reserve Chairman Jerome Powell’s recent speech, which lacked a clear position on inflation. Powell’s tone did not change during the question-and-answer session before the Economic Club of Washington, despite the strong job data from the previous week.
The euro remains strong.
The euro recovered its strength in the following session, rising by 0.21% to $1.075 from a low of $1.067.
Markets monitoring the data
Powell’s speech did not offer any important new information, according to Chris Weston, head of research at Pepperstone, which led the markets and central bank to place more faith in statistics and less faith in Fed officials.
Comments on Interest Rates by ECB Officials
Investors are taking into account comments made by two German employees of the European Central Bank that indicated there was still potential for interest rates in the euro zone to rise. Joachim Nagel, the head of the German central bank, said that “large rate rises” are required; nevertheless, his colleague Isabel Schnabel said that it is still not obvious if monetary policy is significantly affecting inflation.
Decline in the Basket of Currencies
Following a 0.3% drop in the previous session, the value decreased by 0.19% to 103.1 against a basket of currencies on Wednesday. The pound rose 0.3% to $1.209, recovering from its one-month low of $1.196 set on Tuesday.
Strong Jobs Report’s Effect
Following Friday’s positive employment data, which showed a gain of 517,000 jobs last month, the dollar briefly rose. This led to investors raising their expectations for future interest rate increases by the Fed, which led to the U.S. dollar index reaching a one-month high of 103.96 on Tuesday. On Wednesday, futures pricing revealed that the market expects the Fed funds rate, which is now in a range of 4.5% to 4.75%, will peak near 5.1% by June.
ECB and Yen Volatility
The ECB’s interest rates are now 2.5%, but traders in the futures market anticipate an increase to about 3.5% by late summer. Additionally, the yen increased by 0.15%, making one dollar equal to 130.88 yen. Following a gain of more than 1% on Tuesday, the fell by 0.26% to $0.634 while rising by 0.42% to $0.699 in the meanwhile. As anticipated, the Reserve Bank of Australia increased its cash rate by 25 basis points on Tuesday and reaffirmed the need for further hikes.