Dollar higher in anticipation of Powell’s speech
2023.02.07 12:46
Dollar higher in anticipation of Powell’s speech
By Tiffany Smith
Budrigannews.com – In anticipation of Federal Reserve Chair Jerome Powell’s speech on Tuesday, investors will pay attention to the dollar’s rise to one-month highs for any indications of how high interest rates in the United States might go this year.
The erased session losses of up to 0.2 percent and reached its highest level since Feb. 6 at 103.93 on the, which measures the performance of the dollar against a basket of six other currencies. At 103.91, it was up 0.3 percent.
After a sharp rise in job growth last week ended hopes for a tempered Fed, investors will be looking for Powell’s take on the labor market in a speech at the Economic Club of Washington later in the day.
According to Karl Schamotta, chief market strategist at Corpay in Toronto, “Markets are bracing for a concerted jawboning effort as Fed officials work to convince investors that terminal rates could move above 5.25 percent – and hold around there into 2024.”
“We expect Chair Powell to emphasize the stubbornness of the underlying inflation pressures while highlighting the strength of the labor market and its capacity to withstand higher rates,” according to our expectations.
According to futures contracts for U.S. interest rates, markets anticipate that the Fed funds rate will reach a peak just above 5.1 percent by June, as opposed to expectations of a peak below 5% prior to Friday’s jobs report.
Traders who were betting on a pause in the Fed’s rate-hike cycle were wrongfooted by Friday’s jobs report, which also helped the US currency.
After hitting a five-week low of $1.0670, the euro dropped 0.5 percent to $1.0671.
Simon Harvey, head of FX analysis at Monex, stated, “(Powell) has the chance to walk back some of the commentary that he made on Wednesday last week that prompted this dovish read.” However, he added that he did not anticipate any new communication from Powell.
“There is still a problem with the labor market, and the Fed still has some progress to make.” “There are signs of positivity in terms of the disinflationary pressures that are in the pipeline.”
After falling to a one-month low of $1.1974 the previous session, sterling was last 0.4% lower against the dollar at $1.1982.
After last week’s meeting of the Bank of England, which was viewed as dovish, investors are hoping for additional commentary from central bankers this week.
After rising as much as 1% following the country’s central bank’s announcement that additional increases would be required and a 25-basis-point increase in the cash rate—a more hawkish policy stance than many had anticipated—the Australian dollar was up 0.2 percent at US$0.6895.
The dollar-yen pair was down 0.5% at 131.925 as the Japanese yen attempted to recover some of its losses over the previous two sessions.
Following a report that the government of Japan has spoken with Bank of Japan Deputy Governor Masayoshi Amamiya, who is thought by markets to be more dovish than other candidates, to succeed incumbent central bank governor Haruhiko Kuroda, the yen moved away from its one-month lows.
