Dollar retreats after Fed chair comments
Wednesday 14 July, 2021
Daily Currency UpdateUSD - United States DollarThe US dollar retreated after US Federal Reserve chair Jerome Powell stated that the central bank expects inflation to remain elevated in the coming months. He added that the economy is still “a ways off” from a point where the central bank would start easing support. The US Dollar Index was down 0.39%, trading at 92.39 at the time of writing. Powell’s testimony to Congress came a day after Consumer Price Index figures showed that US consumer prices surged in June by the most in 13 years. The dollar enjoyed a broad-based uptick on this news on Tuesday before edging lower this morning. The CPI data was skewed by a surge in prices across the used car sales market as supply constraints continue to disrupt the availability of semiconductors and the production of new vehicles. Used car prices jumped 10.5% in the month of June and added almost half a percent to the overall CPI increase. Considering this, some analysts argue that inflation pressures are being driven by supply-side constraints and will prove transitory.
Key MoversSterling climbed against the dollar after figures showed UK inflation rose more than expected to 2.5%, its highest level in almost three years. GBPUSD rose 0.40% to trade at 1.3867 at the time of writing. The euro also climbed against the dollar following Fed chair Powell’s testimony. According to some analysts, short-term movement for the euro largely depends on where the US dollar goes as market participants continue to adjust to Fed comments and higher inflation. EURUSD was up 0.38%, trading at 1.1824 at the time of writing.Demand for the Canadian dollar was little changed after The Bank of Canada once again tapered its bond-buying program in a bid to rein in emergency levels of pandemic stimulus. The central bank also forecasted higher inflation while holding interest rates at the same level. Policymakers indicated they don’t expect any hikes before the second half of 2022. This was largely in line with market expectations.
- EUR/USD: 1.1773 - 1.1827 ▲
- GBP/USD: 1.3802 - 1.3889 ▲
- AUD/USD: 0.7437 - 0.7485 ▲
- USD/CAD: 1.2453 - 1.2524 ▲