Investing.com – The US dollar rose on Tuesday as Federal Reserve Chairman Jerome Powell downplayed the likelihood of another excessive rate cut, while the euro fell ahead of the release of the latest eurozone inflation data.
At 04:10 ET (08:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.2% higher at 100.737, after rising from 0 overnight .3%.
Hawkish Powell helps the dollar
The chairman of the Federal Reserve indicated that the US central bank will continue to cut interest rates, but indicated that it will likely stick to interest rate cuts of a quarter of a percentage point in the future.
“The 50 bp cut in September means that market prices are structurally more easing, perhaps also based on the assumption that the Fed would not want to underperform on easing if a 50 bp move were priced in by the FOMC date ,” said ING analysts. , in a note.
“Powell said the base case is two 25 basis point increments by the end of the year, which is an unusually specific guidance that reflects his dissatisfaction with subdued market prices,” ING added. “The balance of risks in the very near term is likely tilted to the upside for the dollar.”
The widely viewed monthly magazine is released on Friday and the US economy is expected to have added 144,000 jobs in the past month.
Weaker-than-expected data could revive fears about the prospect of a recession, while unexpectedly strong job growth could raise concerns that the Fed won’t cut rates as deeply as expected.
The euro is preparing to release inflation
In Europe, yields fell 0.1% to 1.1120 ahead of the release of the latest figure later in the session, amid hopes of more rate cuts from the European Central Bank as the year draws to a close.
Data released on Monday showed German inflation fell slightly more than expected to 1.8% in September, slightly below the forecast of 1.9%, and followed a 2.0% year-on-year increase in consumer prices in August.
Inflation is also declining in France, Italy and Spain, suggesting there is downside risk to the eurozone’s forecast of 1.8% annual growth in September.
European Central Bank President Christine Lagarde told parliament on Monday that “the latest developments reinforce our confidence that inflation will return to target in a timely manner,” and this should be reflected in the October 17 policy decision.
traded 0.2% lower at 1.3340, retreating further from last week’s high at 1.3430 and climbing to a level not seen since February 2022.
Yen slips after BOJ minutes
rose 0.4% to 144.16 after the Bank of Japan’s July meeting showed policymakers were divided over how quickly the central bank should raise interest rates further, raising uncertainty about the timing of the next rise of borrowing costs.
At its July meeting, the BOJ unexpectedly raised short-term interest rates by a 7-2 vote to 0.25%, taking another step toward winding down a decade of massive stimulus.
rose to 7.0185 as trading in the yuan was quiet, with Chinese markets now closed until next Tuesday as the country celebrates Golden Week.
