By Saqib Iqbal Ahmed
NEW YORK (Reuters) -The dollar slipped across the board on Wednesday after Federal Reserve Chair Jerome Powell said continued progress on inflation “is not assured,” though the U.S. central bank still expects to reduce its benchmark interest rate later this year.
“If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” Powell said in remarks prepared for delivery to the House Financial Services Committee.
The euro was 0.37% higher against the dollar at $1.0897, after strengthening to $1.09155, its highest since Feb. 2.
“Fed Chairman Powell’s opening statement to Congress essentially repeated the same main points that he and his colleagues have been hitting for months,” Matt Weller, head of market research at StoneX, said.
But Powell’s words disappointed traders, who in recent weeks had begun to speculate that the Fed would back away from any potential rate cuts in the first half of the year, Weller said.
“With Fed Chairman Powell refusing to endorse that possibility, some forward-thinking traders have reversed bullish bets on the greenback from the past couple weeks,” he said.
Powell will appear before the Senate Banking Committee on Thursday.
The , which measures the currency’s strength against a basket of six currencies, was down 0.41% at 103.36. The index had climbed as high as 104.97, up about 3.6% for the year, in mid-February, helped by robust U.S. economic data, but has retreated as recent reports showed some softness.
Data on Wednesday showed U.S. private payrolls rose slightly less than expected in February, while wages for workers remaining in their jobs increased at the slowest pace in 2-1/2 years, consistent with a cooling labor market. The Labor Department’s more comprehensive and closely watched February employment report is due on Friday.
“Job openings and ADP private payroll data keep the path open for Fed rate cuts later this year,” Bill Adams, chief economist for Comerica (NYSE:) Bank, said in a note, citing the report by Automatic Data Processing (NASDAQ:).
The dollar slipped on Tuesday after data showed U.S. services industry growth slowed last month.
Traders also braced for the ECB’s rate decision on Thursday with the central bank expected to leave its benchmark interest rate at a record 4%, putting the focus on clues about when cuts may begin.
“We think they are going to echo their message again and tomorrow is not going to change the outlook,” Danske Bank’s Mellin said.
Elsewhere, sterling edged up 0.25% to $1.2738 as traders digested Britain’s latest fiscal plans, possibly the last budget before an election expected later in the year.
British finance Minister Jeremy Hunt offered no surprises in his latest statement, announcing a two percentage point cut to National Insurance Contributions (NICs), while freezing fuel and alcohol duty.
was up 5.76% at $66,963, rebounding from Tuesday’s sharp swoon after it hit a new high. The cryptocurrency’s recent price rise has been fueled by investors pouring money into U.S. spot exchange-traded crypto products and the prospect that global interest rates may fall.
Against the yen, the dollar was 0.45% lower at 149.38 yen on reports that some Bank of Japan board members think it would be appropriate to lift rates from below zero at the March meeting.
Analysts are mostly expecting the BoJ to exit negative rates at the April meeting if Japan’s spring wage negotiations result in solid pay hikes.
The U.S. dollar weakened 0.57% against its Canadian counterpart after the Bank of Canada kept its key overnight rate steady at 5% on Wednesday as expected and said it was still too early to consider a cut, given persistent underlying inflation.
The Australian dollar brushed off gross domestic product growth of a mere 0.2% in the fourth quarter, reinforcing the case for rate cuts. The currency was last up 0.94% at $0.6565.
Read the full article here