Dollar Holds Steady as Traders Anticipate Fed Minutes for Rate Clues
Dollar Stability and Fed Rate Clues
The dollar steadied on Wednesday as traders awaited minutes of the Federal Reserve’s latest policy meeting for further clues on the central bank’s rate outlook. Data from last week showed sticky U.S. inflation, prompting investors to push back bets the Fed would start cutting rates in March. Markets are now pricing in the first cut in June, compared with March at the start of the year. Traders are now pricing in 94 basis points (bps) worth of easing by the Fed this year.
Expectations and FOMC Meeting Minutes
A slim majority of economists polled by Reuters expects the Fed to cut interest rates in June. The minutes of the Fed’s latest policy meeting due later in the day will provide further clarity on the outlook for U.S. rates. According to Vishnu Varathan, chief economist for Asia ex-Japan at Mizuho Bank, “The overarching FOMC minutes takeaway must be that it is not (yet) time to initiate a rate cut.”
Currency Movements and Euro Zone Confidence
The dollar, measuring the currency against six peers, edged 0.1% higher to 104.17, while the euro also dropped 0.1% to $1.0795, ahead of a euro zone consumer confidence survey due later in the day. Chris Turner, global head of markets at ING, said a mild improvement in the February numbers is expected.
Sterling and Economy Recovery
Elsewhere, sterling fell 0.1% to $1.2604, and it was some distance away from Tuesday’s one-week high of $1.2668, having retreated from that level after comments from Bank of England Governor Andrew Bailey. Bailey said on Tuesday he was comfortable with investors betting on interest rate cuts this year, but pointed to signs that Britain’s economy was picking up after falling into recession in late 2023.
Yuan Movement and Property Market
The Chinese yuan rebounded to a near three-week high, helped by some bounceback in its battered equity markets. Its offshore counterpart rose to a three-week high, and was last up 0.1% at 7.1971 per dollar. China on Tuesday announced its biggest cut in its benchmark mortgage rate to help prop up a struggling property market and the broader economy, though the move failed to draw much investor excitement as experts said more needs to be done.
