Investing.com – The US dollar fell in early European trading on Wednesday after Federal Reserve Chairman Jerome Powell indicated progress has been made in curbing inflation, while the euro rose higher ahead of the second round of the vote in the French parliament.
At 04:35 ET (08:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 105.287.
Dollar drops after Powell’s forgiving comments
The dollar fell lower after comments Tuesday from the Fed’s head at a conference in Portugal sponsored by the European Central Bank reinforced expectations that U.S. interest rate cuts are not far away.
The Fed has made “significant progress” in reducing the pace of price increases to 2%, Powell said, noting that the labor market — a key driver of inflation — is showing signs of “cooling,” with wage increases. relaxation back to ‘more sustainable levels’.
“As we expected, he sounded quite optimistic about disinflation, even as he continued to exercise caution on next policy steps,” ING analysts said in a note. “Markets are now anticipating a Fed easing of 18 basis points by September, and a total of 45 basis points by the end of the year.”
The Federal Reserve will release data later Wednesday from its June monetary policy meeting, when the central bank left interest rates unchanged at more than two-decade highs and said it expects to cut borrowing costs just once this year.
Politics weighs on the euro
rose 0.2% to 1.0762, with the euro maintaining support, helped by data showing that the crucial services component of eurozone inflation remains stubbornly high, suggesting it would take some time for interest rates would be reduced again.
The ECB and the ECB are due to speak at the central banking forum in Portugal later on Wednesday, while Eurozone June figures, also due later, are expected to remain in expansionary territory.
The euro was also helped by news that opponents of France’s National Rally have stepped up their bid to keep the far-right party from power in Sunday’s runoff election.
rose 0.1% to 1.2696 as Britain’s general election took place on Thursday, with the opposition Labor party widely expected to return to power.
Britain’s tight finances mean any new government will have little room to increase spending, potentially removing a catalyst for sterling’s weakness and keeping volatility in check.
The yen falls to a new 38-year low
In Asia, trading was up 0.2% at 161.81, with the pair hitting a near 38-year high, with Japanese officials largely sidelined over the risk of intervention.
Finance Minister Shunichi Suzuki said on Tuesday that forex movements were being vigilantly watched, but gave no clear intervention warning.
rose to 7.2735, with the yuan falling to an eight-month low after hitting the lowest since October for the .
