Mar 6 2024: On Wednesday, the U.S. dollar saw a slight decline as investors awaited Federal Reserve Chair Jerome Powell’s congressional testimony and the European Central Bank’s policy announcement. Meanwhile, bitcoin resumed its rally, although it remained below the previous day’s record high.
Lack of significant catalysts kept the dollar subdued, especially after Tuesday’s data indicating a slowdown in U.S. services industry growth. Traders were keenly anticipating Powell’s testimony, expecting him to emphasize the Fed’s data-dependent approach and refrain from specifying rate cut timing.
Stefan Mellin, Chief Analyst at Danske Bank, anticipates Powell to maintain ambiguity regarding rate cuts, supporting the view of a synchronized easing cycle between Europe and the U.S., which could bolster the dollar.
Markets are pricing in approximately 90 basis points of easing from both the Fed and the European Central Bank this year, with rate cuts expected to commence in June.
Against the dollar, the euro edged up nearly 0.2%, with attention on the ECB’s interest rate decision expected on Thursday. The central bank is likely to maintain rates at a record low of 4%, with focus on hints about potential rate cuts in the future.
The yen strengthened slightly amid reports suggesting a possible rate lift from negative territory at the Bank of Japan’s March meeting. The dollar weakened to 149.75 yen.
Sterling saw a modest increase ahead of the British budget announcement, with speculation about potential tax cuts.
The Australian dollar shrugged off weak GDP data, rising 0.3% against the dollar.
The dollar index, which measures the currency against a basket of six others, dipped around 0.1%.
In the cryptocurrency market, bitcoin surged to a new high before retracing, while ether, the second-largest cryptocurrency, reached its highest level since December 2021.