Traders are waiting for Fed Chairman Powell’s first day of testimony before Congress on the state of the US economy, where he is expected to repeat that the Fed will wait for more data before acting
The US dollar was stable on Wednesday as traders avoided making big bets ahead of Fed Chairman Jerome Powell’s congressional testimony, ECB’s rate decision and US jobs data later this week.
In crypto currencies, bitcoin rose marginally but was below record highs hit in the overnight volatile session.
The absence of catalysts kept the dollar in a tight range, having slid overnight on data that showed the U.S. services industry growth slowed slightly last month.
The February U.S. jobs report on Friday stands as a test for the rates outlook, with the potential to rock markets if it surprises to the upside.
Traders are waiting for Fed Chairman Powell’s first day of testimony before Congress on the state of the US economy, where he is anticipated to repeat that the Federal Reserve will wait for more data before making any rate reductions.
The Fed chief may also echo comments that strong core inflation in January has not significantly changed the central bank’s outlook, according to Carol Kong, a currency strategist at the Commonwealth Bank of Australia.
A reiteration of this message is unlikely to alter current market pricing for a June start to the FOMC’s (Federal Open Market Committee) rate cut cycle, and should therefore have limited effect on the USD, Kong added.
Markets have priced in around a 60% probability of rates cut in June, per the CME FedWatch tool.
The dollar index is hovering near 103.84. The euro dropped 0.1% to $1.0846 as traders braced for the ECB’s interest rate decision later on Thursday.
Charu Chanana, head of currency strategy at Saxo, said she does not expect the ECB to send a clear dovish message given that eurozone inflation dropped less than expected last month.
Still, inflation prints are likely to be revised downwards, and this poses some downside risks for EUR, but it will remain a buy on dips given that the economy is stabilizing, she added.
Business activity in the euro area showed signs of recovery in February, as per a survey published on Tuesday.
