The Dollar Rises After Powell’s Comments
Dollar Index Reaches Near Seven-Week High
The U.S. dollar surged in early European trade, nearing a seven-week high after the Federal Reserve announced it would maintain interest rates and downplayed the possibility of a March rate cut. At 04:25 ET (09:25 GMT), the Dollar Index, tracking the greenback against a basket of six other currencies, traded 0.5% higher at 103.575, close to its highest level since mid-December.
Dollar Boosted by Fed’s Decision
The Fed’s decision to keep interest rates unchanged following its latest policy-setting meeting was widely expected. However, the dollar received a boost after Fed Chair Powell stated that recent inflation trends would deter the central bank from implementing any near-term monetary loosening. Goldman Sachs adjusted its forecast of the Fed starting interest rate cuts to May from March, with an expectation of five 25 basis points rate cuts this year.
Euro Slips Ahead of Eurozone CPI Data
Meanwhile, the euro traded 0.2% lower at 1.0791, ahead of the release of the latest eurozone inflation data. The European Central Bank has tamed inflation, with the eurozone CPI expected to fall to 2.7% in January on an annual basis, edging closer to the ECB’s 2% medium-term target.
Policies Affecting Pound and Yen
The pound traded 0.3% lower at 1.2647 ahead of the Bank of England’s policy meeting, where rates are expected to remain unchanged. In Asia, the yen gained slightly after minutes from the Bank of Japan’s January meeting showed policymakers actively discussing a move away from its ultra-dovish stance.
Yuan Continues to Face Pressure
Elsewhere, the yuan remained under pressure as data suggested a sluggish economic recovery in China. Manufacturing sector growth in January appeared to be slowing, while home sales plummeted, indicating further pressure on a worsening property crisis.
