Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Dollar Firm as Powell's Testimony to Congress Looms

ForexJun 21, 2021 08:15
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters.

By Peter Nurse - The dollar edged higher in early European trade Monday, keeping the positive tone generated last week by the Federal Reserve's hawkish turn, which saw it accelerate its timetable for raising interest rates.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 92.267, just off its highest level since April, after having gained 1.9% last week. That was its biggest weekly gain since March 2020.

USD/JPY was down 0.3% at 109.84, EUR/USD edged higher to 1.1867, just above Friday’s two-month low, while the risk-sensitive AUD/USD was up 0.2% at 0.7494, just above a six-month low.

The catalyst for this move higher in the dollar was the policy members in the U.S. Federal Reserve, the country’s central bank, reacting last week to the strong economic data, and especially the surge in inflation.

The majority of FOMC members expected two interest rate increases of 25 basis points in 2023, a year earlier than expected but, perhaps more importantly, seven of the 18 members felt that the first increase could come as early as next year. 

“I put us starting in late 2022,” St. Louis Fed President James Bullard said Friday during a TV interview on CNBC, referring to interest rate increases by the U.S. central bank.

Additionally, Fed chief Jerome Powell indicated that the members of the Federal Open Market Committee had begun the conversation on stopping the bank’s massive bond-buying program.

This news pushed short-end yields higher, but the longer-end rates have fallen as traders played down the long-term U.S. inflation risk with a more active Federal Reserve.

At 2:55 AM ET, the benchmark 10-year U.S. Treasury note yielded 1.39%, the lowest since early March this year, while the 2-year note yielded 0.27%, its highest level since March 2020.

Attention will now turn to comments from several Fed speakers this week, and an appearance by Fed Chair Jerome Powell before Congress on Tuesday in particular.

“Let’s see whether the Fed is prepared to adopt any new language on tapering. Were views to coalesce around tapering actually starting in September – not December -  the dollar could rally further,” said analysts at ING, in a note.

Elsewhere, GBP/USD was down 0.1% at 1.3801, just above Friday’s two-month low, with the rapid growth of the new Covid-19 variant and the associated delay of the country’s full reopening continuing to weigh.

That said, there was some good news late Friday, as Fitch Ratings upgraded its outlook for the U.K. sovereign debt to stable from negative, saying the country’s economy has proved more resilient than it expected.

Eyes turn to Thursday’s meeting of the Bank of England, the last for Chief Economist Andy Haldane. 

While the central bank is widely expected to keep its monetary policies on hold, inflation in the U.K. rose above its 2% target in May for the first time in two years, something that Haldane could seize on given his more hawkish stance on reducing stimulus measures.


Dollar Firm as Powell's Testimony to Congress Looms

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email