Saqib Iqbal Ahmed
NEW YORK (Reuters) – The dollar fell across the board on Wednesday after Federal Reserve Chairman Jerome Powell said further progress in inflation was “not guaranteed” although the U.S. central bank still expects to cut its benchmark interest rate later this year. year.
“If the overall economy progresses as expected, it will likely be appropriate to begin easing policy restrictions at some point this year,” Powell said in remarks prepared for the House Financial Services Committee.
The euro rose 0.37% against the dollar to $1.0897 after strengthening to $1.09155, its highest level since February 2.
“Fed Chairman Powell’s opening statement to Congress essentially repeated the same main points he and his colleagues have been discussing for months,” said Matt Weller, head of market research at StoneX.
But Powell’s words disappointed traders, who in recent weeks had begun to speculate that the Fed would back off from any potential rate cuts in the first half of the year, Weller said.
“With Fed Chairman Powell refusing to support this possibility, some forward-thinking traders have reversed bullish bets on the dollar made in the last couple of weeks,” he said.
Powell will appear before the Senate Banking Committee on Thursday.
The index, which measures a currency’s strength against a basket of six currencies, was down 0.41% at 103.36. The index rose to 104.97 in mid-February, up about 3.6% for the year, helped by strong U.S. economic data, but retreated as recent reports showed some softness.
Data on Wednesday showed U.S. private sector payrolls grew slightly less than expected in February, while wages for workers keeping their jobs rose at the slowest pace in two-and-a-half years, consistent with a cooling market. labor. A more complete and closely watched Labor Department jobs report for February will be released on Friday.
“Jobs and ADP private sector payroll data pave the way for Fed rate cuts later this year,” Bill Adams, chief economist at Comerica Bank (NYSE:) said in a note, citing a report from Automatic Data Processing (NASDAQ:) . .
The dollar fell on Tuesday after data showed U.S. services industry growth slowed last month.
Traders were also bracing for the ECB’s rate decision on Thursday as the central bank is expected to leave its benchmark interest rate at a record 4%, focusing on clues about when cuts could begin.
“We think they will repeat their message again and tomorrow will not change the forecast,” Danske Bank’s Mellin said.
Elsewhere, the pound rose 0.25% to $1.2738 as traders digest Britain’s latest budget plans, possibly the last budget before elections expected later this year.
British Chancellor of the Exchequer Jeremy Hunt offered no surprises in his latest announcement, announcing a two percentage point cut to National Insurance Contributions (NIC) while freezing fuel and alcohol duties.
rose 5.76% to $66,963, recovering from Tuesday’s sharp decline after hitting a new high. The recent rise in cryptocurrency prices has been driven by investors pouring money into exchange-traded crypto products and the prospect that global interest rates could fall.
Against the yen, the dollar fell 0.45% to 149.38 yen on reports that some Bank of Japan board members consider raising rates below zero at its March meeting.
Analysts largely expect the Bank of Japan to abandon negative rates at its April meeting if Japan’s spring wage talks lead to significant wage increases.
The U.S. dollar weakened 0.57% against its Canadian counterpart after the Bank of Canada kept its key overnight rate at 5% on Wednesday as expected and said it was too early to consider a cut given persistent core inflation. .
The Australian dollar posted gross domestic product growth of just 0.2% in the fourth quarter, strengthening the case for rate cuts. The currency was last up 0.94% at $0.6565.