Business
Dollar outshines Euro, British pound amid anticipated FED meeting
In anticipation of Federal Reserve Chair Jerome Powell’s highly anticipated speech, which investors believe would provide hints on the U.S. central bank’s tightening plans, the dollar clung to recent gains against the euro and pound sterling on Friday.
After attempting to break back above parity versus the greenback numerous times this week without success, the euro was scarcely moved in Asian trade at $0.9971. At the start of the week, it dipped below that critical psychological level.
At $1.1821, the pound was down 0.14% from the more than two-year low of 1.1718 it reached earlier in the week.
The announcement later in the day by Britain’s energy regulator of a staggering increase in the cap on energy prices, which will further boost inflation in the already fragile British economy, could act as a catalyst for the pound. A price cap that is determined every three months transfers fuel price rises to British consumers.
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The dollar index, which compares the value of the dollar to six important rival currencies, was at 108.5, on track to post a weekly gain of 0.38%, and was already up 2.5% in August.
At 1400 GMT, Powell will deliver a speech at the Jackson Hole symposium, and investors will be watching for any indication of how quickly the Fed still intends to hike interest rates.
In recent weeks, policymakers have emphasized how crucial it is for the Fed to bring inflation under control.
Neel Kashkari, president of the Minneapolis Federal Reserve Bank, stated on Tuesday that his greatest concern is that the U.S. central bank would underestimate the scope and duration of price pressures and will need to implement even more aggressive rate hikes in order to combat inflation.
Investors will also be watching Powell to see if his remarks on the long-term picture will cause markets to reverse their bets on monetary easing in 2023, which would support the dollar.
Markets are presently pricing in rate cuts later that year on the assumption that policymakers will be more concerned about the slowing economy than rising inflation by then, and they are positioning U.S. rate hikes to peak this year or right at the start of next year.
While the Australian dollar has been doing better against the battered European currencies, it nevertheless dropped 0.27% and went back below the psychological level of $0.7. At 136.81 against the dollar, the Japanese yen slipped lower.
