Investing.com – The U.S. dollar rose on Wednesday, boosted by hawkish comments from Fed officials, as declining consumer confidence weighed on the euro.
At 03:35 ET (08:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.2% higher at 105.480.
Hawkish Fed Responses Boost the Dollar
The dollar got a boost during Tuesday’s session after the Fed governor said the U.S. central bank is likely to keep interest rates steady “for some time” in an effort to help limit “elevated” inflation. She added that she does not expect the central bank to reduce lending. costs in 2024.
Bowman – usually seen as one of the Fed’s more hawkish voices – emphasized that it is not yet “appropriate” to cut rates, adding that she remains “willing” to raise rates even further if inflation stagnates or reverses.
Her comments come after the president of the San Francisco Fed said Monday that recent “bumpy” inflation has “failed to inspire confidence” among policymakers and has clouded the Fed’s path to achieving price stability.
Expectations about the future path of U.S. interest rates have been a key driving force in the currency market, with Fed officials calling for more data showing a slowdown in inflation before agreeing to a rate cut.
Friday’s figures are in the spotlight as the central bank’s preferred inflation gauge, and should reveal whether the nascent slowdown in inflation continues.
But the recent PCE measurements are not in line with expectations. The latest figures showed that US inflation made an unexpected sideways move in April.
Another such reading could undermine the argument that interest rate cuts are coming soon.
German consumer confidence is declining
fell 0.2% to 1.0696 after data showed it will fall slightly in July, ending a four-month streak of gains.
The consumer confidence index, jointly published by GfK and the Nuremberg Institute for Market Decisions, unexpectedly fell to -21.8 in July, compared to a slightly revised -21.0 in June.
The index joins other indicators pointing to a bumpy road ahead for Europe’s largest economy, after Ifo’s business climate index and the HCOB’s composite PMI also fell unexpectedly this month.
France’s elections kick off this weekend, with political unrest in France following President Emmanuel Macron’s shock election putting pressure on the single currency.
“Markets appear to be making peace with the prospect of a victory in the National Rally and a deadlock in parliament, especially after Le Pen’s party attempted to allay market concerns on the budget side,” ING analysts said in a note .
“We suspect that investors remain much more sensitive to a better-than-expected outcome from the New Popular Front, which recently announced a 25 billion euros spending plan for 2024, followed by another 150 billion euros in 2027, now seen by the markets as a bigger threat is perceived. from a fiscal stability perspective.”
fell 0.1% to 1.2668, trading within tight ranges as Bank of England policymakers remained silent ahead of the country’s July 4 general election.
Yen near intervention level
In Asia, it traded 0.2% higher at 159.93, close to the 160 yen level that prompted intervention in May.
Government officials continued to warn that they would intervene in case of excessive volatility against the yen.
The yen’s latest weakness followed dovish signals from the Bank of Japan on policy tightening at its June meeting.
rose 0.1% to 7.2667, remaining at a seven-month high after another weak midpoint fix from the People’s Bank of China.
Increasing pressure on the yuan amid concerns about a trade war with the West saw the PBOC maintain two straight days of weak midpoint fixes.
