Dollar Trades Stronger Ahead of Powell’s Testimony
The United States (U.S) dollar was stronger against its major trading partners ahead of testimony from Federal Reserve Chairman Jerome Powell on Wednesday and Thursday.
After his opening statement on Wednesday, Powell is likely to get tough questions about the Federal Open Market Committee’s decision to raise the federal funds rate by an unusually large 75 basis points last week and how the FOMC plans to proceed.
Powell returns to Capitol Hill on Thursday. The weekly Redbook retail sales report is due for release while the Mortgage Bankers Association reported earlier Wednesday that new mortgage applications rose for a second straight week, partially offset by a further decline in refinancing activity due to a surge in mortgage rates.
A quick summary of foreign exchange activity heading into Wednesday shows that USDJPY fell to 136.1376 from 136.6642 at the Tuesday US close but was up from 135.4387 at the same point Tuesday morning.
There are no Japanese data on Wednesday’s schedule. The yen continues to be pressured by the widening gap between the Bank of Japan’s accommodative policy stance and the Fed’s rapid interest rate increases.
USD-CAD rose to 1.298 from 1.2918 at the Tuesday US close and 1.2946 at the same point Tuesday morning. This week’s data highlight in Canada, the report on consumer inflation, will be released today.
The Bank of Canada meets next on July 13 after raising rates by 50 basis points at the June meeting, with further monetary policy tightening expected. USD-EUR fell to 1.0519 from 1.0535 at the Tuesday US close and 1.0548 at the same point Tuesday morning. EU consumer confidence data will also be released.
European Central Bank Vice President Luis de Guindos said earlier Wednesday that tools to prevent fragmentation of debt yields across its member countries discussed last week will not affect the ECB’s main goal of fighting inflation.
The European Central Bank’s monetary policy committee meets next on July 21 when it is expected to begin its tightening cycle, well behind the Fed and Bank of England. READ: FOREX Traders See US Dollar Recovered after Early Plunge
GBP-USD fell to 1.2258 from 1.2280 at the Tuesday US close and was virtually unchanged from the 1.2259 level at the same time Tuesday morning.
UK consumer inflation data released earlier Wednesday were mixed, with the overall figures slightly ahead of expectations but the core figure easing more than expected from the previous month. The Bank of England is expected to maintain its tightening cycle to tamp down inflation after last week’s 25-basis point increase. # Dollar Trades Stronger Ahead of Powell’s Testimony
