The US dollar fell in early European trading on Friday, as the recovery from seven-month lows faltered ahead of Federal Reserve Chairman Jerome Powell’s much-anticipated speech at the Jackson Hole Symposium.
At 04:30 ET (09:30 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 101.245, not far from its lowest since Jan. 2.
Dollar dips ahead of Powell speech
The dollar saw a small recovery earlier in the week, but is still down about 1% this week, heading for a fifth straight week of losses.
The weakness came after concerns about a weak economy and expectations that the US Federal Reserve is close to cutting interest rates.
Attention now turns to Powell’s speech later Friday, when he is expected to provide further clues on interest rates and the economy.
“This speech is likely to be used to prepare markets for a September cut, which is fully priced in and largely expected from the July Fed minutes and recent Fed speakers,” ING analysts said in a note.
“The question now is whether it will go as far as opening the door to a move of around 50 basis points — if not in September, then later this year.”
The CME FedWatch tool showed that markets now price in about three-quarters of the odds of a 25 basis point Fed rate cut at its September meeting, with the odds of a 50 basis point cut now down.
Euro, pound rise on weaker dollar
In Europe, the pound rose 0.1% to 1.1123, not far from a 13-month high it touched on Wednesday.
Euro zone consumers’ expectations about inflation over the next 12 months remained stable for the third month running in July, a European Central Bank survey showed on Friday.
ECB policymakers can use this survey as evidence that the public has confidence in their ability to bring inflation down to their 2% target while cutting interest rates.
The European Central Bank has room to cut interest rates perhaps twice more this year as inflation broadly remains on the downward path that policymakers have expected, ECB policymaker Martins Casax said.
“We are broadly at the baseline of our expectations and this is consistent with the gradual decline in interest rates,” Latvia’s central bank governor, Kazaks, said on the sidelines of the US Federal Reserve’s Jackson Hole Economic Symposium.
Sterling rose 0.3% against the US dollar to 1.3129, just below a 13-month high hit on Thursday after strong August activity data.
Markets now expect more rate cuts from the Fed by the end of the year than from the ECB or the Bank of England.
Yen rises after Ueda signals rate hike
In Asia, the yen fell 0.2% to 145.99, with demand for the yen after Bank of Japan Governor Ueda said short-term interest rates remain too low and need to rise further to reach neutral levels.
He also reiterated the central bank’s recent message that it would raise interest rates further if inflation remained stable.
Ueda’s comments helped boost the yen, which has risen sharply since the central bank raised interest rates by 15 basis points in late July.
The National Electricity Company share decreased by 0.1% to 7.1372, while it rose by 0.4% to 0.6732 and rose by 0.4% to 0.6159.