Investing.com – The U.S. dollar fell in early European trading on Friday as a recovery from a seven-month low faltered ahead of Fed Chairman Jerome Powell’s highly anticipated speech at the Jackson Hole symposium.
At 04:30 ET (09:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 101.245, not far from its lowest level since January 2.
The dollar weakens ahead of Powell’s speech
The dollar staged a small recovery earlier this week, but is still posting losses of around 1% this week, heading for its fifth consecutive week of losses.
This weakness followed concerns about a weakening economy and expectations that the Federal Reserve is close to a rate cut.
The focus is now squarely on a speech from Powell later on Friday, where he is expected to provide more clues on interest rates and the economy.
“He will likely use this speech to prepare markets for a September rate cut, which is fully priced in and largely anticipated in the July Fed minutes and recent Fed speakers,” ING analysts said in a note.
“The question is whether he will go so far as to open the door to a 50 basis point move – if not in September, then later this year.”
Markets are now pricing in a nearly three-quarters chance that the Fed will cut rates by 25 basis points at its September meeting, the CME FedWatch tool showed, with a 50 basis point cut becoming less likely.
Euro, pound sterling gain on weak dollar
In Europe, it traded 0.1% higher at 1.1123, not far from the 13-month high it reached on Wednesday.
Consumers’ inflation expectations in the euro zone for the next 12 months remained stable for the third month in a row in July, a survey by the European Central Bank showed on Friday.
This research could be used by ECB policymakers as evidence that the public has confidence in their ability to bring inflation back to the 2% target while cutting interest rates.
The ECB has room to cut interest rates possibly twice more this year, as inflation remains largely on the downward path that policymakers had in mind, according to ECB policymaker Martins Kazaks.
“We are broadly at the baseline of our projections and that corresponds to a gradual decline in interest rates,” Kazaks, the governor of Latvia’s central bank, said on the sidelines of the US Jackson Hole Economic Symposium Federal Reserve.
traded 0.3% higher at 1.3129, just below the 13-month high it reached on Thursday after releasing strong activity data for August.
Markets are now pricing in more Fed rate cuts than those from the European Central Bank or the Bank of England by the end of the year.
The yen is rising as Ueda signals interest rate hikes
In Asia, yields fell 0.2% to 145.99, while the yen was in favor after the Bank of Japan’s Ueda said short-term rates were still too low and needed to be raised further to reach neutral levels. reaches.
He also reiterated the bank’s recent message that it will raise interest rates further if inflation remains stable.
Ueda’s comments boosted the yen, which has been in a slump since the central bank raised rates by 15 basis points in late July.
traded 0.1% lower to 7.1372, while it rose 0.4% to 0.6732 and rose 0.4% to 0.6159.
