Investing.com – The U.S. dollar rose on Tuesday as Federal Reserve Chairman Jerome Powell played down the possibility of another big interest rate cut, while the euro fell ahead of the latest euro zone inflation data.
At 04:10 ET (08:10 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, rose 0.2% to 100.737, after rising 0.3% overnight.
Hawkish Powell helps the dollar
The Federal Reserve Chairman indicated that the US central bank will continue to cut interest rates, but indicated that it is likely to stick to quarter-point rate cuts in the future.
“A 50 basis point cut in September means the market is pricing more structurally pessimistic, perhaps also on the basis that the Fed will not want to ease back if a 50 basis point move is priced in by the deadline,” analysts at ING said. Federal Open Market Committee. , in a note.
“Powell said the base case is two 25 basis point moves by the end of the year, an unusually specific guidance that signals his dissatisfaction with cautious pricing in the market,” ING added. “The balance of risks in the very near term is likely to be tilted towards the upside for the dollar.”
The widely watched monthly report is scheduled to be released on Friday, and the US economy is expected to add 144,000 jobs last month.
Weaker-than-expected data could revive concerns about a possible recession, while unexpectedly strong job growth could raise concerns that the Fed will not cut interest rates as deeply as expected.
Euro prepares for inflation release
In Europe, the index fell 0.1% to 1.1120 before the latest figure was released later in the session, amid hopes for further interest rate cuts by the European Central Bank as the year approaches its end.
Data released on Monday showed German inflation fell slightly more than expected to 1.8% in September, slightly below expectations of 1.9%, and followed a year-on-year increase in consumer prices of 2.0% in August.
Inflation is also falling in France, Italy and Spain, suggesting that risks to the euro zone’s forecast of 1.8% annual growth in September are to the downside.
ECB President Christine Lagarde told Parliament on Monday that “recent developments reinforce our confidence that inflation will return to target in due course,” and this should be reflected in the policy decision of October 17.
It traded 0.2% lower at 1.3340, further back from last week’s high of 1.3430, rising to a level not seen since February 2022.
Yen falls after Bank of Japan meeting minutes
It rose 0.4% to 144.16, after the Bank of Japan’s July meeting showed policymakers were divided on how quickly the central bank should raise interest rates, highlighting uncertainty about the timing of the next increase in borrowing costs.
At its July meeting, the Bank of Japan unexpectedly raised short-term interest rates to 0.25% by 7 votes to 2, taking another step towards phasing out a decade of massive stimulus.
It rose to 7.0185, with yuan trading calm with Chinese markets now closed until Tuesday next week as the country celebrates Golden Week.
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