Dollar finds stability following Powell’s congressional testimony, while the British pound awaits the Bank of England’s meeting.
During early European trade on Thursday, the U.S. dollar steadied near a one-month low after Federal Reserve Chair Jerome Powell’s semi-annual testimony to Congress. Meanwhile, the British pound slightly weakened in anticipation of the upcoming Bank of England meeting.
At 01:50 ET (05:50 GMT), the Dollar Index, which gauges the greenback against a basket of six other currencies, slightly increased to 101.707, trading just above its recent one-month low.
Amid mixed signals from the Federal Reserve, Powell addressed the House Financial Services Committee of Congress on Wednesday, marking the first day of his two-day semi-annual testimony. He remained consistent with his message, indicating that further U.S. rate hikes are likely if the economy continues on its current trajectory.
However, Powell refrained from committing to a rate hike in July, contrary to some expectations, while other members of the Federal Reserve called for an extended pause in the central bank’s rate hike cycle.
In an essay published earlier in the day, Atlanta Federal Reserve President Raphael Bostic stated, “My baseline is that we should stay at this level for the rest of the year. If we simply press on with additional rate hikes, we could needlessly drain too much momentum from the economy.”
Later today, Powell is scheduled to speak again, this time before the Senate Banking Committee.
Meanwhile, the GBP/USD pair experienced a 0.1% decline, reaching 1.2756, not far from last week’s one-year high of 1.2849, in anticipation of the Bank of England’s policy-setting meeting.
The Bank of England is widely expected to raise interest rates for the 13th consecutive time later today. However, the chances of a substantial 50-basis-point hike increased following the country’s May headline inflation index, which remained at 8.7% on Wednesday—the highest among major economies.
In another development, EUR/USD declined marginally to 1.0988, remaining close to the recent one-month high. European Central Bank officials have maintained a hawkish stance even after the recent interest rate hike by the central bank.
Speaking at a conference, Bundesbank Chief Joachim Nagel likened inflation to a voracious creature and emphasized the need for steadfastness in combating it, stating, “Inflation to me is like a greedy beast, and we do have to fight against this very greedy beast. As inflation fighters, we have to be very stubborn because inflation is so stubborn.”
Additionally, the risk-sensitive AUD/USD pair experienced a 0.5% decline, reaching 0.6762, as the Australian dollar faced pressure from uncertainty surrounding Chinese stimulus measures and commodity demand.
USD/JPY dropped 0.1% to 141.75, with the Japanese yen trading near six-month lows due to the Bank of Japan’s loose monetary policy. Meanwhile, USD/CNY remained unchanged at 7.1795, with the Chinese yuan hovering near six-month lows.