USD down after Powell testimony
The US dollar was down sharply overnight despite a warning from the US Federal Reserve chair Jerome Powell that the central bank still “has a long way to go” in terms of taming inflation.
In his semi-annual testimony to Congress, Powell said most policymakers expect US interest rates will need to be raised further.
Powell said: “Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year.”
However, Powell said the Fed remains “data dependent” and the pace of hikes might be at a more “moderate” pace.
While Powell appeared forceful, markets saw the commentary as taking a backward step from last week’s prediction of two more rate hikes, and the US dollar fell.
Aussie rebounds from one-week lows
FX markets cross Asia rebounded as the US dollar fell.
The AUD/USD gained 0.2% as it climbed from one-week lows. The Aussie was mixed in other markets with the AUD/EUR down 0.5% but the AUD/JPY up 0.5%.
The New Zealand dollar was the best performer with the NZD/USD up 0.6%. The NZD/JPY gained 0.9%. The USD/SGD fell 0.3% while the USD/CNH lost 0.1%.
GBP in focus after red-hot inflation
The British pound will be in focus tonight after a volatile session following another red-hot inflation reading yesterday.
UK headline annual inflation was reported steady at 8.7% in May — despite hopes for a fall to 8.4% — and continued to drive expectations for further rate hikes from the Bank of England.
The GBP has recently strengthened but last night’s volatility saw the currency mostly lower.
The BoE meets at 9.00pm AEST and is expected to raise official rates from 4.50% to 4.75%, but a 50-basis point hike remains a possibility.
Also tonight, the Swiss National Bank (expected to hike rates to 1.75%) and Norway’s Norges Bank (expected to raise rates to 3.50%) both bring down policy decisions.
USD weaker after Powell testimony
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 19 – 23 June
All times AEST
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