The U.S. Federal Reserve (Fed) Chairman Jerome Powell is about to speak, and the dollar rose to a one-month high on Tuesday (8th). Investors will be watching Powell’s comments closely for any clues about how high U.S. interest rates may rise this year.
ICE, which tracks the dollar against six major currencies dollar index (DXY) erased losses of as much as 0.2 percent to hit 103.93, the highest since Feb. 6. before the deadline,dollar indexGains pared to 103.7.
Investors will focus on Powell’s remarks at the Economic Club of Washington at 1:40 p.m. U.S. time Tuesday (1:40 a.m. Wednesday Taiwan time), particularly his views on the job market. The US employment data in January far exceeded expectations, dampening investors’ expectations for the Fed’s policy shift.
“Markets are bracing for a concerted lobbying effort as Fed officials try to convince investors that terminal rates could rise above 5.25 percent and stay there through 2024,” said Karl Schamotta, chief market strategist at Corpay in Toronto. Will emphasize its commitment to underlying inflationary pressures, while emphasizing the strength of the labor market and its ability to withstand rate hikes.”
U.S. interest rate futures show that the market expects the federal funds rate to peak at just above 5.1% in June, compared with expectations for a peak below 5% ahead of Friday’s nonfarm payrolls report. The report spooked traders who had been counting on an imminent pause in the Fed’s rate hike cycle, while boosting the dollar.
Simon Harvey, head of foreign exchange analysis at Monex, said: “Powell has the opportunity to retract some of the comments he made last Wednesday, which was interpreted by the outside world as dovish, but Powell may not send any new messages. The Fed still has some work. To do, despite progress in curbing inflation, there are still problems in the labor market.”