Dollar drifts as Powell comments bring September rate cut in focus
By Ankur Banerjee
SINGAPORE, July 16 (Reuters) -The dollar hung around five-week lows on Tuesday as comments from Federal Reserve Chair Jerome Powell bolstered the case for a rate cut in September, while cryptocurrenices gained on rising odds of former President Donald Trump getting reelected.
Powell said on Monday the three U.S. inflation readings over the second quarter of this year "add somewhat to confidence" that the pace of price increases is returning to the Fed's target in a sustainable fashion.
"We've had three better readings, and if you average them, that's a pretty good place," Powell said at an event at the Economic Club of Washington.
The comments, likely Powell's last until his press conference following the Fed's July 30-31 meeting, shifted rate cut expectations. Markets are now anticipating 68 basis points of easing this year, with a rate cut in September fully priced in, CME FedWatch tool showed.
The euro EUR=EBS was a shade lower at $1.0893, while sterling GBP=D3 last fetched $1.2967. The dollar index =USD, which measures the U.S. unit versus six peers, was at 104.3, not far from the one month low of 104 it touched on Monday.
"Despite dovish inclinations, Powell remained in a data-dependent mode which is warranted after the Fed has burnt its fingers with inflation running back higher in Q1 after a dovish pivot at the end of 2023," said Charu Chanana, head of currency strategy at Saxo.
"Markets may need to wait longer for the confirmation of their September rate cut hopes, and growth and labour data will be on the radar such as retail sales today."
U.S. retail sales for June due later in the day are expected to show a decline of 0.3% on a month on month basis.
Meanwhile, the yen JPY=EBS was weaker in early trading after touching a one-month high against the dollar at 157.165 per dollar on Monday. It was last at 158.54, with traders wary of further intervention from the Japanese authorities.
Traders suspect Tokyo intervened in the market in another effort to lift the Japanese currency last week after the cooler-than-expected U.S. inflation report. Data from Bank of Japan indicates that authorities may have spent up to 3.57 trillion yen to prop up the frail yen.
Markets will be eyeing fresh money markets data to gauge if Tokyo intervened on Friday as well.
In cryptocurrencies, bitcoin BTC= rose 1% to trade just shy of the $65,000 mark, near its highest in a month. Ether ETH= was 1% higher at $3,466 at a two-week peak.
Cryptocurrencies, along with shares of companies that could benefit from a Donald Trump presidency, jumped on Monday after an assassination attempt on the Republican candidate boosted expectations he would win the November election.
Trump presented himself as a champion for cryptocurrency during a San Francisco fundraiser in June, although he has not offered specifics on his proposed crypto policy.
"While the crypto scene still has SEC Chair Gary Gensler as a consideration on the regulatory side, potentially having the leader of the free world in your corner will always sit well with crypto heads," said Chris Weston, head of research at Pepperstone.
In other currencies, the Australian dollar AUD=D3 was 0.16% lower at $0.6749, creeping away from the six-month high it touched last week. The New Zealand dollar NZD=D3 eased 0.17% to $0.6064, hitting a two-week low.
World FX rates https://tmsnrt.rs/2RBWI5E
Reporting by Ankur Banerjee in Singapore; Editing by Christopher Cushing
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
