US Federal Reserve (Fed) Chairman Jerome Powell is set to speak, and the dollar rose to a one-month high on Tuesday (8th). Investors will be watching Powell’s comments closely for any clues about how high US interest rates could rise this year.
The ICE US Dollar Index (DXY), which tracks the greenback against six major currencies, erased an intraday loss of as much as 0.2 percent to reach 103.93, the highest since February 6. By now, the US dollar index pared its gains to 103.7.
Investors will focus on Powell’s remarks at the Economic Club of Washington at 1:40 pm US time on Tuesday (1:40 am Wednesday Taiwan time), particularly his views on the jobs market. US employment data in January was well ahead of expectations, easing investors’ expectations for a Fed policy change.
“Markets are bracing for a concerted lobbying effort as Fed officials try to convince investors that final rates could rise above 5.25 percent and stay there through 2024,” said Karl Schamotta, chief market strategist at Corpay in Toronto. Which will underline his commitment to weighted core inflation, while emphasizing the strength of the labor market and its ability to withstand rate rises.”
US interest rate futures show the market expects the federal funds rate to peak just above 5.1% in June, compared with expectations for a peak below 5% ahead of today’s nonfarm payrolls report Friday. The report spooked traders who had been counting on an imminent pause in the Fed’s rate hikes, while boosting the dollar.
Simon Harvey, director of foreign exchange analysis at Monex, said: “Powell has an opportunity to take back some of the comments he made last Wednesday, which were cited as a tame interpretation by the outside world, but Powell may not send any new messages. The Fed still has some work to do. To do it, despite the progress in curbing inflation, there are still problems in the labor market.”
