Home Daily Commentaries The U.S dollar pares gains following Jerome Powell’s congressional testimony and bets on the Fed easing this year.

The U.S dollar pares gains following Jerome Powell’s congressional testimony and bets on the Fed easing this year.

Daily Currency Update

USD - United States DollarThe U.S. dollar was marginally lower this morning amid traders betting that the Fed will ease rates this year. This happened after the release of written congressional testimony from Fed Chairman Jerome Powell. A quarter-point cut by around September this year is already being priced in. The January 2021 fed funds futures imply a rate of 1.215 percent at the end of 2020, when the rate at this moment is 1.75 percent. Powell said that he is keeping an eye on fallout from the deadly coronavirus outbreak in China, singling his attention on risks threatening the U.S. economy. Following his testimony, the U.S dollar has been moving erratically up and down without taking a clear direction and drawing technical analysis shapes of market indecision.

Key Movers

The USD/CAD pair is trading at 1.3305, representing a fall of 0.1 percent (stronger Loonie); however, it stopped appreciating when Canadian Finance Minister Bill Morneau warned that the spread of the coronavirus is likely to have a “real” impact on Canada’s economy. In the U.K., there was a mixed bag of data keeping the chances of a Bank of England rate cut this year intact. GDP and manufacturing numbers were released; the positive surprise was the GDP numbers (YoY) which came in at 1.1 percent when the forecast was 0.8 percent. However, industrial production (YoY) came in at -1.8 percent versus a survey of only -0.8 percent, and manufacturing production came in at -2.5 percent versus the -1 percent expected. The trade balance came in positive, probably because of a weak pound over the last few months, at +7,715 million Pounds versus the -350 million pounds expected. As a consequence, the Pound rallies 0.17 percent versus the U.S. dollar, trading at 1.2936. The doubts surrounding the chances of the U.K. reaching a trade deal with the European Union before its transition is keeping the direction of the Pound blurry for the next few days. The Aussie dollar rallies strongly versus the U.S dollar this morning due to a positive mood in the capital markets and the S&P 500 touching new highs in overnight trading. The AUD/USD pair trades at 0.6772 at the time of this writing. The Euro held close to a four-month low against the U.S. dollar, trading at 1.0889, an intraday low, as market participants assess the impact of the death toll from the coronavirus, and while uncertainty has emerged in Europe over who will succeed German Chancellor Angela Merkel. The ECB’s policy meeting in January revealed that a rate hike isn’t on the horizon. It also implied its long-awaited strategic review wouldn’t deliver anything meaningful in the next few weeks. This uncertainty is likely another reason for the Euro’s weakness.

Expected Ranges

  • USD/CAD: 1.3224 - 1.3309 ▼
  • EUR/USD: 1.0880 - 1.1000 ▲
  • GBP/USD: 1.2920 - 1.3050 ▲
  • AUD/USD: 0.6700 - 0.6751 ▲
  • NZD/USD: 0.6400 - 0.6450 ▲