US Dollar Slips After Powell’s Speech
The U.S. dollar slipped in early European trade Friday, but is set for healthy weekly gains after Fed Chair Jerome Powell hinted at further rate hikes to combat inflation.
The Dollar Index, tracking the greenback against a basket of six other currencies, edged 0.1% lower to 105.727 at 03:20 ET (07:20 GMT), still on course for a gain of almost 1% this week.
Investors welcomed Powell’s hawkish tone, boosting the dollar after he warned of possible further rate hikes to combat inflation.
Impact of Powell’s Comments
The Fed’s commitment to achieving a stance of monetary policy sufficiently restrictive to bring inflation down to 2% over time has resonated with investors, leading to expectations of possible future rate increases.
Traders still see a high probability of the Fed keeping rates steady when it meets in December for the final time this year, but some are now considering the possibility of a rate increase early next year.
Other Currency Movements
The euro edged higher to 1.0667, on track to lose 0.6% this week, while the pound rose to 1.2224 despite stagnation in the U.K.’s third-quarter GDP. The yen also rose to 151.34, prompting intervention expectations in currency markets by Japanese authorities, as the Bank of Japan contrasts sharply with the more hawkish tone from the head of the Federal Reserve.
On the other hand, the yuan weakened to 7.2930, and the Australian dollar dropped to 0.6362 after dovish signals from the Reserve Bank of Australia.
Market Watch
The European Central Bank held interest rates steady at its meeting in late October, with President Christine Lagarde due to speak later in the session. Eurozone business activity data released at the start of the week suggested a growing chance of a recession in the region by the end of the year.
Overall, the market dynamics continue to shift as investors react to central bank policies and macroeconomic data, shaping the global currency landscape.
