The dollar stabilizes at the beginning of the trading day this Wednesday in Europe before the appearance of the president of the Federal Reserve, Jerome Powellbefore Congress, while sterling rises as UK inflation remains very high.
The dollar index, which tracks the dollar against a basket of six other major currencies, rose to 102.185, just above its recent one-month lows.
What is expected of Powell
The dollar got a boost on Tuesday with the release of surprisingly strong US housing data, as housing developments rose 21.7% in May, much more than expected.
However, the gains were limited, as there was no corresponding increase in building permits and traders reluctant to commit ahead of Powell appearance before Congress before the Committee on Financial Services of the United States House of Representatives that begins this Wednesday.
The Federal Reserve paused its year-long rate-raising cycle last week, although it also signaled the possibility of more rate hikes this year, so Powell’s remarks will be watched closely for further clues on the future course of monetary policy.
Inflation in the UK remains high
Elsewhere, GBP/USD is up 0.2% to 1.2792, after UK inflation showed little sign of easing, with CPI coming in at 8.7% yoy in May, unchanged from the previous month.
The Bank of England meets on Thursday and is expected to raise interest rates again from the current 4.5% as inflation remains more than four times above the 2% medium-term target.
“Following some bleak data on inflation and wages, markets now expect the Bank of England to push rates closer to 6% in the coming months”, ING (AS:INGA) analysts say in a note. “That is equivalent to almost six more rate hikes and is very close to the highs seen at the height of the ‘mini-budget crisis’ last year.”
Euro remains near one-month highs
EUR/USD is down 0.1% to 1.0911, holding near 1-month highs; risk-sensitive AUD/USD rises to 0.6788 and USD/JPY gains 0.2% to 141.75, nearing seven-month highs as the Bank of Japan has maintained its ultra-loose policy monetary.
USD/CNY rose 0.2% to 7.1934, with the yuan falling 0.2% to a nearly seven-month low against the dollar, a day after the People’s Bank of China cut its prime lending rate, the first such move in the last 10 months, in an attempt by the Chinese authorities to jump-start a slowing economic recovery.
Source: Ambito
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