Powell testimony fails to give USD boost
Daily Currency Update
Demand for the US dollar weakened against a basket of currencies on Wednesday as US Federal Reserve chair Jerome Powell testified on the Semi-Annual Monetary Policy Report before the Senate Banking Committee. Powell reiterated that the central bank will continue raising interest rates to curb inflation. “Inflation has obviously surprised to the upside over the past year, and further surprises could be in store. We therefore will need to be nimble in responding to incoming data and the evolving outlook,” Powell said as part of prepared comments. Latest forecasts released last week show that rates could roughly double in the second half of the year between 3.25% to 3.5%. The US Dollar Index was down 0.46% trading around 103.96 at the time of writing.
Key Movers
EURUSD and GBPUSD climbed on Wednesday following Powell's testimony, which failed to give a boost to the US dollar. EURUSD pushed back up to 1.06, while GBPUSD advanced to 1.23 at the time of writing.The pound initially fell in London trading following the release of UK CPI data, which climbed to 9.1%. The core reading, which strips out energy and fuel costs, fell from 6.2% to 5.9%, highlighting the surge in energy prices. It is predicted to get to at least 10% by Q4, when another rise in the cap of energy costs is due to kick in, which will raise household bills by another 50%. Government support packages should help offset the costs, especially in lower income households. The release supports expectations that the Bank of England needs to continue to tighten monetary policy. The next 0.5% interest rate hike in August is priced into the market. However, the central bank seems to favor more modest hikes and has never raised rates by more than 0.25%.
Expected Ranges
- EUR/USD: 1.0473 - 1.0599 ▲
- GBP/USD: 1.2167 - 1.2313 ▲
- AUD/USD: 0.6884 - 0.699 ▼
- USD/CAD: 1.2914 - 1.2994 ▲