The US dollar rose in European trade on Thursday against a basket of major rivals, while trying to recover from three-year lows on active short-covering.

Following recent remarks by Fed Chair Jerome Powell, the odds of a Fed interest rate cut in the first half of the year tumbled, with traders now waiting for more US labor data to gather more clues.

The Price

The dollar index rose 0.5% today to 99.75, with a session-low at 99.22.

On Wednesday, the index lost 0.8%, resuming losses and recovering from three-year lows at 99.01.

Powell

Fed Chair Jerome Powell said that tariffs and the ongoing trade war between the US and the world, especially China, could weaken the Fed’s ability to contain inflation and boost US growth.

Powel expects inflation to rise and growth to slow down, but it’s still not clear which one of them needs more focus amid trade uncertainty. 

Powell said the Fed is assuming a wait and see stance until the dust clears before taking a monetary policy decision.

He also expects the economy  to move away from full employment and contained inflation targets due to the impact of tariffs.

US Rates

According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut in May stood at 17%.

The odds of such a cut in June stood at a much bigger 65%.

Gold prices fell in European trade on Thursday for the first time in three days away from recent record highs amid active profit-taking, while the dollar rebounds against major rivals. 

Fed Chair Jerome Powell warned that the trade war weakens the Fed’s ability to contain inflation and support US growth, hurting the odds of a US rate cut in the first half of the year.

The Price

Gold prices fell 0.7% today to $3320 an ounce, with  a record high at $3357.

On Wednesday, gold rose 3.5%, the second profit in a row, and the largest since March 2023 as the US-China trade war escalated.

US Dollar

The dollar index rose 0.5% on Thursday against a basket of major rivals, hurting greenback-denominated gold futures.

The dollar’s rebound from three-year lows comes amid mounting doubts about a Fed interest rate cut in the first half of the year.

Powell

Fed Chair Jerome Powell said that tariffs and the ongoing trade war between the US and the world, especially China, could weaken the Fed’s ability to contain inflation and boost US growth.

Powel expects inflation to rise and growth to slow down, but it’s still not clear which one of them needs more focus amid trade uncertainty. 

Powell said the Fed is assuming a wait and see stance until the dust clears before taking a monetary policy decision.

He also expects the economy  to move away from full employment and contained inflation targets due to the impact of tariffs.

According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut in May stood at 17%.

The odds of such a cut in June stood at a much bigger 65%.

Now traders await US unemployment claims data later today to gather more clues on the future of Fed monetary policies.

Euro fell in European trade on Thursday against a basket of major rivals, moving in a negative zone against the dollar on profit-taking away from three-year highs. 

Now global markets await a crucial policy meeting by the European Central Bank today, expected to cut interest rates for the sixth meeting in a row.

The Price

The EUR/USD fell 0.4% today to $1.1355, with a session-high at $1.1409.

The paire closed up 1.1% on Wednesday, resuming gains and approaching three-year highs at $1.1474.

ECB

The European Central Bank is wrapping up its third policy meeting this year later today, widely expected to cut rates and provide fresh clues on the path ahead for monetary policies this year.

It would be the sixth such cut to eurozone borrowing costs to 2.4%, the lowest since October 2022.

The Australian dollar fell in Asian trade on Thursday against a basket of major currencies, and gave up a three-month high against the US dollar, on track for the first loss in seven days on profit-taking. 

Earlier Australian labor data showed the economy returned to strong job creation with lower than expected unemployment, but it probably won’t impede the RBA’s policy easing strategy.

The Price

The AUD/USD price fell 0.3% today to $0.6351, with a session-high at $0.6377.

The pair rose 0.4% on Wednesday, the sixth profit in a row, hitting a three-month high at 63.92 cents following strong Chinese data.

Australian Labor Market

Australia's unemployment came at 4.1% in March, up from 4.0% in the previous reading, but below estimates of 4.2%.

Australia’s economy added 32.2 thousand new jobs in March, below estimates of a 39.8 thousand addition, while the previous reading was revised to show a low of 52.8 thousand jobs. 

Australian Rates

The odds of a 0.25% interest rate cut by the Reserve Bank of Australia in May stood at a full 100%.

The RBA maintained interest rates unchanged at 4.1% earlier this month but said the May meeting provides a good opportunity to reconsider monetary policies.