Dollar falls following Powell’s June delay suggestion. Jerome Powell, the head of the Federal Reserve, took a fairly dovish attitude on Friday, which caused the dollar to decline.
US Dollar slips on Fed Powell’s Indication on Interest Rates Policy
The U.S. central bank might not have to hike interest rates as much, according to Fed Chair Jerome Powell. Who took a modestly dovish posture on Friday. This was counter to market predictions.
Powell remarked at a central bank convention in Washington that because of tighter lending conditions, “one of our interest rate policy might not require an increase by the amount it might have been to accomplish our aims.”
Although Powell was not blatantly dovish, he was certainly not aggressive.
As a result, you can see how the bond market and the FX market are covering hardline expectations. This stops the dollar‘s upward trend as we approach the weekend.
Policymakers are facing other constraints as well in offering clear guidance on the next meeting. Regardless of the data, the Fed is unlikely to raise interest rates if a down-to-the-wire political standoff over the U.S. federal debt ceiling remains unresolved. If an actual U.S. debt default is the result, the central bank may even be pushed towards emergency steps to ease the burden on the economy.
Given the ongoing strong inflation, Fed members so far have essentially pushed back against rate-pause predictions for June.
The US dollar Market Reaction
In response to Powell’s remarks, the rate futures market has factored in a roughly 21% likelihood that the Fed would increase the benchmark rate by 25 bps next. during its meeting in June, with the bulk of traders accounting for a break. Prior to the chairman of the Fed spoke, the rate hike wager was about forty percent.
After reaching 7 -week top the US dollar index dropped 0.24% to 103.08. The dollar saw a 0.6% rise over the whole week. After climbing to a 6-month peak of 138.745 yen previously, the dollar fell 0.7% versus the yen to 137.76 yen.
