The dollar stabilizes in early trade before Fed Chair Powell speaks later today

8 Nov 2023 , 09:56 AM

After several Federal Reserve speakers hinted at additional rate hikes, the dollar steadied itself on Wednesday and began to rise as investors anticipated a speech from Chair Jerome Powell outlining the central bank’s future course of action.

The dollar found support as markets continue to disagree over whether U.S. rates have peaked and when the Fed should start loosening monetary policy. The dollar fell last week as a result of the Fed’s decision to maintain its policy rate and data suggesting that the U.S. labour market is cooling.

According to the CME FedWatch tool, futures price in a 22% possibility that rate reduction might occur as early as March, but they also hint to a roughly 15% chance of another raise by January.

The British pound was last trading at $1.2286, a considerable distance away from its seven-week high against the dollar earlier in the week.

After a small reprieve last week, the Japanese yen fell below 150 per dollar once more. The previous value was 150.56 per dollar.

The U.S. dollar index increased 0.03% to 105.57 and was headed for a weekly gain after recording its biggest weekly decline in about four months the previous week.

Many Fed members on Tuesday spoke in a measured manner, stating that they are assessing the impact of rising long-term bond rates, some indications of a slowdown, and positive economic indicators when determining whether or not to raise interest rates further in order to reduce inflation.

The focus now shifts to Fed Chair Powell’s remarks later on Wednesday.

The euro dropped 0.07% to $1.0691 as a result of the euro zone’s declining economic prospects. Tuesday’s data revealed that September’s industrial production in Germany decreased more than anticipated.

After falling 0.8% the day before, the Australian dollar was weaker at $0.6425, marking its worst daily decrease in over a month.

After four months of stable policy, the Reserve Bank of Australia (RBA) hiked interest rates to a 12-year high on Tuesday. However, it softened its tightening tendency by making it more dependent on new data.

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