The dollar was mostly lower in Europe, extending losses made on Wednesday after the Fed hinted at rate cuts
The dollar was mostly lower in early trading in Europe on Thursday, extending losses made on Wednesday after Federal Reserve Chairman Jerome Powell dropped his clearest hint yet that the central bank will cut interest rates at its next policy meeting at the end of the month.
By 3:45 AM ET (0745 GMT), the dollar index, which measures the greenback against a basket of developed-market peers, was at 96.553, rebounding a little from an overnight low of 96.463. That’s around half a percent lower than it was before Powell begun his testimony.
In addition to Powell’s testimony, which warned of extended “uncertainty” weighing on the economic outlook, the minutes of the Fed’s last policy meeting, released later on Wednesday, warned that some members “judged that uncertainties and downside risks surrounding the economic outlook had increased significantly over recent weeks.”
Some were less than convinced by the way the minutes arrived at conclusions that showed a clear bias to easing.
CEO of the consultancy Blonde Money in Oxford, Helen Thomas said the summary amounted to “almost total capture of the Federal Reserve” by financial markets and an administration already eyeing next year’s election campaign.
Thomas said that they’ll argue stuff could weigh on inflation. They’ll point to trade tensions, geopolitics, Brexit, whatever. It doesn’t matter. They’re cutting.
The dollar’s biggest losses were against the yen, dipping as low as 107.86, before rebounding to just above 108 in Europe. It’s also sliding against the loonie, which is now testing a nine-month high after the Bank of Canada left its key rate unchanged on Wednesday.
The dollar also slipped against the British pound, which has been better supported since data showing that the economy rebounded somewhat in May. Sterling was at $1.2534, up nearly a cent from this week’s lows.
The euro also hit its highest level in nearly a week to trade up 0.2% at $1.1271. Whether it goes on to test $1.13 may depend on the accounts of the last European Central Bank’s policy meeting, which are due for release at 7:30 AM ET (1130 GMT). ECB board member Benoit Coeure is also due to speak at 6:15 AM ET (1015 GMT).
Powell will resume his testimony, this time to the Senate, at 10 AM ET (1400 GMT), while U.S. CPI and jobless claims data, both due at 8:30 AM ET (1230 GMT) may also generate some action in the dollar.