© Reuters.
Investing.com – The US dollar fell in early European trade on Monday amid uncertainty surrounding US debt ceiling negotiations and after dovish comments from Federal Reserve Chairman Jerome Powell.
At 02:55 EST (06:55 GMT), the dollar, which measures the greenback against a basket of six other currencies, was down 0.1% at 103.020, after retreating from last week’s high of 103.63, which is The level was last seen on March 20th.
The dollar took a hit late last week as negotiations over possibly raising the US debt ceiling, and thus avoiding a very damaging default, suddenly collapsed, with Republicans walking out of the meeting.
US President Joe Biden and Republican House Speaker Kevin McCarthy are due to meet later on Monday, but compromises must be made and so more brinkmanship is expected before early June, when the Treasury is seen running out of money.
Also of interest on Monday were comments from FOMC members, following comments from the Fed chair on Friday that hinted at a pause in the US central bank’s rate-raising cycle in June.
Tightening credit conditions means that “our policy price may not need to go up as much as it would have to achieve our goals,” Powell told a conference in Washington.
This followed hawkish comments from a number of regional Fed chairs throughout the past week, which raised market expectations of a rate hike at the next meeting.
It rose 0.1% to 1.0819, continuing Friday’s rebound from a seven-week low ahead of comments from European Central Bank officials Luis de Guindos and Philip Lane.
These policymakers are likely to point to further hikes by the European Central Bank after President Christine Lagarde said on Friday that the central bank needs to keep interest rates high to curb inflation in the medium term.
“We still have to raise interest rates sustainably, so it’s time for us to act, look at this target we set and achieve it,” Lagarde told Spanish state television TVE.
The ECB has a medium-term inflation target of 2%, while it slowed only marginally in April to 7.3% from 7.5%.
It traded largely flat at 1.2438, just above last week’s three-week low, and was down 0.2% to 0.6633, while down 0.1% to 137.85, with the Japanese yen supported by the prospect of a halt to US interest rate hikes.
It rose 0.2% to 7.0225, with the yuan remaining above the psychologically important level 7 even after US President Joe Biden signaled a possible improvement in Sino-US relations.
