Euro hits six-week high after Powell remarks
Euro rose in European trade on Thursday against a basket of major rivals, extending gains for the second day against dollar and hitting six-week highs following remarks by Fed Chair Jerome Powell ahead of Congress.
Such remarks didn't convince the markets that the Fed will certainly raise interest rates by 25 basis points twice this year, in turn boosting euro's standing.
EUR/USD rose 0.1% to 1.0995, the highest since May 11, with a session-low at 1.0981, after rising 0.6% yesterday, marking the first profit after a three-day streak of losses.
Powell
Fed Chair Jerome Powell said today that more interest rate hikes could be undertaken in the future to rein in inflation.
In his testimony ahead of Congress, Fed Chair said the decision to hold interest rates unchanged last week was likely a transient lull and not a sign of ending the cycle.
Powell said in his prepared notes that all participants in the Federal Open Market Committee believe it'll be appropriate to raise interest rates again this year.
He noted that inflation has calmed down but remains much higher than the 2% target.
Powell will complete the second part of his testimony later today in the Senate.
Fed Rates
Following Powell's remarks, chances of a 0.25% Fed rate hike in July fell from 77% to 72%.
European Rates
Following the European Central Bank's meeting and President Christine Lagarde's bullish remarks, most analysts now expect 50 basis points of interest rate hikes by the ECB this year.
The Interest Rate Gap
The interest rate gap between the US and Europe shrank to 125 basis points last week, the smallest such gap since May 2022, and is expected to shrink even more in upcoming months.
Sterling climbs timidly after inflation data
Sterling rose on Wednesday against most major rivals after inflation data, which confounded expectations.
UK consumer prices were up 8.7% in May y/y, same as April, while analysts expected 8.4%.
On a monthly basis, consumer prices rose 0.7%, while core inflation, excluding energy and food, rose 7.1%, up from 6.8% in April, and the highest since March 1992.
Inflation slowed down to below 10% in April but remains much higher than the 2% targets.
Bank of England will announce its policy decisions on Thursday, expected to raise interest rates by 25 basis points.
On trading, GBP/USD rose 0.1% as of 19:44 GMT to 1.2778.
Loonie
Canadian dollar rose 0.6% against US counterpart as of 19:48 GMT to 0.7597.
Earlier Canadian data showed retail sales rose 1.1% last month, while analysts expected a 0.4% increase.
Core retail sales rose 1.3% in May, while analysts expected a 0.5% rise.
The Dollar
The dollar index fell 0.5% as of 19:27 GMT to 102.04, with a session-low at 102.03.
Fed Chair Jerome Powell said today that more interest rate hikes could be undertaken in the future to rein in inflation.
In his testimony ahead of Congress, Fed Chair said the decision to hold interest rates unchanged last week was likely a transient lull and not a sign of ending the cycle.
Powell said in his prepared notes that all participants in the Federal Open Market Committee believe it'll be appropriate to raise interest rates again this year.
He noted that inflation has calmed down but remains much higher than the 2% target.
He noted the labor sector still suffers from shortages despite signs that conditions are improving, however vacant positions outstrip the current workforce by a big margin.
He said the Fed has seen the impact of policy tightening on the most sensitive economic sectors, and that it'll take some time for the full impact to materialise especially on inflation.
He added that inflation outlook remains "firm for the time being".
As for the recent banking troubles, he said such events were a reminder the Fed needs to exercise its regulatory roles closely.
Gold edges down after Powell remarks
Gold prices dipped on Wednesday following remarks by Fed Chair Jerome Powell and even as dollar dipped against most major rivals.
Powell's Testimony
Fed Chair Jerome Powell said today that more interest rate hikes could be undertaken in the future to rein in inflation.
In his testimony ahead of Congress, Fed Chair said the step to hold interest rates unchanged last week was likely a transient lull and not a sign of ending the cycle.
Powell said in his prepared notes that all participants in the Federal Open Market Committee believe it'll appropriate to raise interest rates again this year.
He noted that inflation has calmed down but remains much higher than the 2% target.
He noted the labor sector still suffers from shortages despite signs that conditions are improving, however vacant positions outstrip the current workforce by a big margin.
He said the Fed has seen the impact of policy tightening on the most sensitive economic sectors, and that it'll take some time for the full impact to materialise especially on inflation.
He added that inflation outlook remains "firm for the time being".
Ad for the recent banking troubles, he said such events were a reminder the Fed needs to exercise its regulatory roles closely.
Otherwise, the dollar index fell 0.5% as of 19:27 GMT to 102.04, with a session-high at 102.7, and a low at 102.03.
Gold spot prices stabilized at $1,947 an ounce as of 19:28 GMT.
