Top U.S. central bank officials, including Powell on Tuesday, have provided little indication into when rates may be cut, saying instead that monetary policy needs to be restrictive for longer
The dollar on Wednesday dropped for the first time in six days, as investors consolidated gains after Fed officials repeated the interest rate-cutting cycle is on hold pending new economic data, while the monetary easing outlook for other major central banks remained unchanged.
The greenback also declined from 5-1/2-month highs reached on Tuesday. The dollar index was last down 0.4% at 105.89. So far this year, the index has added around 4.7%.
I see today’s move as more of a slight correction than anything. To put things into context, the dollar spot index is still just off its highest point since mid-November, according to Helen Given, FX trader at Monex USA in Washington.
She added: Fed Chair Jerome Powell’s panel yesterday was the big market-mover for the week, and now traders seem to be hedging on the other side of the market, so we are seeing this retreat today. We are reaching a point where markets have priced in the downshift on cuts from the Fed, so flows are a bit more normalized.
Top U.S. central bank officials, including Powell on Tuesday, have provided little indication into when rates may be cut, saying instead that monetary policy needs to be restrictive for longer.
Recent data showed the U.S. economy remains stronger than anticipated, leading investors to pare their bets on future rate cuts. This was again evident in the Fed’s latest so-called “Beige Book” released on Wednesday. The report suggested U.S. economic activity expanded marginally from late February through early April and companies indicated they expect inflation pressures to hold steady.
After last week’s hotter-than-expected U.S. consumer prices figures, the market has reduced the number of quarter-point rate cuts expected by the Fed this year to less than two. The first is now seen in September, later than a prior June, as per LSEG’s rate app.
