Investing.com – The US dollar was steady in early European trade on Wednesday ahead of Federal Reserve Chairman Jerome Powell’s congressional appearance, while the pound rose as UK inflation continued to rise.
At 02:00 EST (06:00 GMT), the dollar rose against a basket of six other currencies to 102.185, trading above its one-month low.
Focus on Powell’s testimony
The dollar got a boost on Tuesday with the release of surprisingly strong US housing data, rising 21.7% in May, much more than expected.
However, gains were limited as there was no corresponding jump and traders were reluctant to commit aggressively ahead of Powell’s meeting in Congress, starting with the US House Financial Services Committee on Wednesday.
Last week paused the one-year rate hike cycle, but also signaled the potential for more rate hikes later in the year, so Powell’s comments will be studied carefully for further clues on monetary policy.
UK CPI remains very high
Elsewhere, it rose 0.2% to 1.2792 after UK inflation showed few signs of abating, with May coming in at 8.7% year-on-year, unchanged from the previous month.
The meeting meets on Thursday, and it is still widely expected to raise interest rates again from the current level of 4.5% with inflation still more than four times above the central bank’s medium-term inflation target of 2%.
“After some unwelcome inflation and wage data, markets now expect the Bank of England to take rates closer to 6% over the coming months,” ING analysts said in a note. “This equates to approximately six additional price increases and is very close to the high levels we saw in the midst of the ‘mini-budget’ crisis last year.”
The euro remains near a one-month high
It fell 0.1% to 1.0911, staying close to a one-month peak, and the risk-sensitive index rose to 0.6788 and rose 0.2% to 141.75, trading near a seven-month high as the Bank of Japan maintained its ultra-loose monetary policy.
It rose 0.2% to 7.1934, with the yuan falling 0.2% to its lowest level in nearly seven months against the dollar on the day after the People’s Bank of China lowered its key, the first such move in 10 months, as Chinese authorities tried to prop up a slowing economic recovery.