The US Dollar remained mostly steady on Wednesday as investors looked ahead to Federal Reserve Chair Jerome Powell’s speech at this week’s Jackson Hole symposium for guidance on future monetary policy.
Meanwhile, the New Zealand Dollar dropped after the central bank cut its cash rate by 25 basis points to 3.0%, as anticipated, noting that a 50-point reduction had also been under consideration.
The Dollar index, which tracks the greenback against six major currencies, remained steady at 98.319 after earlier reaching a one-week high of 98.441.
Market attention is focused on Powell’s speech on Friday, as investors look for signs of resistance to expectations of a rate cut at the Federal Reserve’s September 16-17 meeting.
Investors currently assign roughly an 85% probability to a 25-basis-point rate cut next month and anticipate a total reduction of around 54 basis points by the end of the year.
“Powell will try to be fairly balanced, but there is a risk we see a hawkish Powell on Friday,” according to Kirstine Kundby-Nielsen, FX analyst at Danske Bank.
“Some of the developments we've seen in inflation dynamics will keep the Fed more cautious.”
Investors, who increased their bets on Fed rate cuts following a weaker-than-expected US jobs report earlier this month, were further bolstered by consumer price data indicating minimal inflationary impact from tariffs, Reuters reports.
However, last week’s stronger-than-anticipated producer price figures added uncertainty to the policy outlook.
Powell has expressed hesitation to cut rates due to anticipated tariff-related inflation this summer.
Later on Wednesday, the Fed will release the minutes from its July 29-30 meeting, when rates were left unchanged, though they may provide limited guidance since the meeting occurred before the weak jobs report.
The New Zealand Dollar fell up to 1.3% to $0.5815, marking its lowest level since April 11, as policymakers reduced their projected cash rate floor to 2.55%, down from the 2.85% forecast in May.
“The market did not expect the bank to send a strong dovish signal that it intends to deliver further cuts,” stated Prashant Newnaha, a rates strategist at TD Securities.
Moreover, the Euro slipped 0.1% to $1.1636, while the Dollar gained 0.1% to 0.8078 Swiss Franc but declined 0.1% to 147.61 Yen.
Elsewhere, the Pound edged higher against both the Euro and the Dollar following stronger-than-expected inflation, highlighting the UK as the advanced economy facing the highest price growth.