On Wednesday, the US dollar stagnated near a three-week low following Federal Reserve Chair Jerome Powell’s guarded stance on risk sentiment. The caution imbued stagnation in the currency’s worth, with market functioning on Thursday reflecting Powell’s cautious demeanor. Though some expected change, barely any shifts in the dollar’s value were observed as the week drew to a close.
Powell, in his initial address to Congress, refused to endorse a depreciation of rates at present. The chairman stated such a move would only be contemplated when there is more certainty about achieving the Federal Reserve’s 2% inflation target, and expressed concerns about a slump in employment rates.
Minor variations were seen in the value of the US dollar against currency majors such as the euro and yen. The dollar index concluded the day at 105.09 after a small uptick on Tuesday from weak US payroll data induced devaluations at week’s start.
US dollar’s stability amid cautious outlook
Contributors to the upturn on Wednesday were attributed to global stock market oscillations and geopolitical events.
Investors remain watchful of implications of the US-China trade accord and its potential influence on the dollar, while also awaiting Federal Reserve’s hints on future interest rate hikes and updates on US labor market statuses. Despite uncertainties, market specialists indicate a steady rebound is in the offing, with a strengthening US dollar as an overall trend.
Predictions from market participants currently show a 73% probability of a rate cut in September, and most expect another rate cut by December’s end. Meanwhile, the euro stayed near a one-month peak as political stalemates are predicted in France post recent elections where left-wing parties emerged triumphant.
The New Zealand dollar experienced a significant reduction with the country’s central bank mulling over potential rate cuts contingent on future inflation rates. As a result, the Kiwi experienced a 0.9% decrease, landing its value at $0.6071.
Conversely, the Australian dollar gained by half a percent against the New Zealand dollar, reaching its apex since February 2023. The Canadian dollar moved to a three-month low against the US dollar over worries about oil prices, while the Japanese yen held a steady value of ¥108.97 against the dollar.
Much speculation is afoot regarding possible impacts on global currencies from the upcoming European Central Bank meeting.
