Federal Reserve Chairman Jerome Powell was the center of attention in his testimony before the Senate Banking Committee, where he suggested that waiting too long to cut interest rates could risk harming the U.S. labor market.
Although he declined to offer any explicit guidance on easing, Powell acknowledged that business conditions had cooled “significantly” and that easing too little or too late “could unduly weaken economic activity and employment.”
The Fed chairman made it clear that rising inflation is not the only risk they face when it comes to adjusting monetary policy, but he also noted that they are still waiting for more data to give them enough confidence to lower borrowing costs.
Link to Fed Chair Powell’s Semi-Annual Monetary Policy Report
Markets are now pricing in a 70% chance of a Fed rate cut in September, up from 63% a week ago, according to the U.S. central bank. CME FedWatch Tool.
Market reaction
US Dollar vs Major Currencies: 5 minutes
Comparison between the US dollar and major currencies Chart by TradingView
The US dollar has been moving cautiously in the run-up to the big speech by JPY, having been mostly sideways against its peers during previous trading sessions.
Although the Fed Chair spoke about the possibility of easing monetary policy soon, the US dollar still advanced across the board during the event, and continued to rise a few hours later.
Shortly after, the US currency regained its daily gains against most of its counterparts, except for the Japanese yen and the British pound.