The US dollar rose on Wednesday, supported by hawkish comments from Federal Reserve officials, while declining consumer confidence weighed on the euro.
At 03:35 ET (08:35 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.2% at 105.480.
Dovish Fed comments boost dollar
The US dollar received a boost during Tuesday’s session after the Federal Reserve Governor said that the US central bank will likely leave interest rates steady “for some time” in an attempt to help contain “high” inflation, adding that she does not expect the central bank to reduce borrowing costs in the future. Year 2024
Bowman — typically seen as one of the Fed’s more hawkish voices — indicated it was not yet “appropriate” to cut interest rates, adding that she remained “willing” to raise rates further if progress in inflation stalls or Reverse it.
Her comments come after the head of the Federal Reserve Bank of San Francisco said on Monday that the recent “blow” in inflation “has not inspired confidence” in policymakers and is muddying the Fed’s path toward price stability.
Expectations of the future path of US interest rates were a major driving force in the foreign exchange market, with Federal Reserve officials calling for more data showing slowing inflation before agreeing to cut rates.
Friday’s data is at the center of attention, as it is the central bank’s preferred measure of inflation and should show whether the emerging slowdown in inflation is continuing.
But recent PCE readings were not in line with expectations. The latest reading showed that US inflation trended unexpectedly in April.
Another reading of this could undermine the argument that interest rate cuts are coming soon.
German consumer sentiment declines
The index fell 0.2% to 1.0696, after data indicated that it is expected to decline slightly in July, ending a four-month series of increases.
The consumer confidence index published by the GfK Institute and the Nuremberg Institute for Market Decisions unexpectedly fell to -21.8 ahead of July, from a slightly revised -21.0 in June.
The index joins other indicators pointing to a bumpy road ahead for Europe’s largest economy, after Ifo’s business climate index and HCOB composite purchasing managers’ index fell unexpectedly this month.
French elections are set to begin this weekend, with political turmoil in France following the shock election of President Emmanuel Macron weighing on the single currency.
“Markets appear to be coming to terms with the possibility of a National Rally win and the parliamentary deadlock, especially after Le Pen’s party tried to calm market concerns on the fiscal side,” analysts at ING Bank said in a note.
“We believe investors are still more sensitive to a better-than-expected outcome by the New Popular Front, which recently announced a €25 billion spending plan for 2024, followed by another €150 billion by 2027, and is now seen in markets as a greater threat.” From a financial stability perspective.”
It fell 0.1% to 1.2668, with the currency trading in a narrow range as policymakers at the Bank of England remained calm ahead of the country’s general election on July 4.
The yen is approaching the intervention level
In Asia, the currency traded 0.2% higher at 159.93, approaching the 160 yen level that prompted intervention in May.
Government officials continued to warn that they would intervene in the event of any excessive volatility against the yen.
The yen’s latest bout of weakness came after cautious signals from the Bank of Japan about tightening policy at its June meeting.
The index rose 0.1% to 7.2667, remaining at a seven-month high, after another weak reform by the People’s Bank of China.
Mounting pressure against the yuan, amid concerns about a trade war with the West, has kept the People’s Bank of China on two consecutive days of weak mid-term reforms.