Dollar rebound extends for third day before Fed's Powell speech
By Samuel Indyk
LONDON (Reuters) -The dollar's rebound extended for a third day on Wednesday after some Federal Reserve policymakers left the door open to further rate hikes, as traders looked to a speech from Chair Jerome Powell on the central bank's future policy path.
The greenback, which hit a seven-week low at the start of the week in the wake of the Fed's decision to hold its policy rate steady and on data pointing to a cooling U.S. labour market, has found a floor as markets remain at odds over whether a peak in U.S. rates has been reached and how soon the Fed could begin easing monetary conditions.
Futures point to a roughly 16% chance of another hike by January, but are pricing in a 21% chance that rate cuts could come as early as March, according to the CME FedWatch tool.
The U.S. dollar index, which last week clocked its sharpest weekly fall in about four months, rose 0.2% to 105.73 and was on track for a weekly gain.
«The data side has been very quiet so the main drivers have been the hawkish comments from Fed speakers,» said ING FX strategist Francesco Pesole.
«They've been trying to push back against the dovish rate repricing.»
A slew of Fed policymakers on Tuesday maintained a balanced tone and said they are weighing strong economic data, some signs of a slowdown, and the impact of higher long-term bond yields as they consider if they will need to hike rates further to bring down inflation.
Focus now turns to remarks from Fed Chair Powell later on Wednesday.
«There's risk we could see further U.S. dollar strength today assuming Powell and (company) continue to remind markets of their 'higher for longer' narrative,» said Matt Simpson, senior market analyst at City Index.
The euro fell 0.2% to $1.0674,
Read more on investing.com
