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The U.S. dollar saw downward pressure on Thursday as market anticipation of potential rate cuts by the Federal Reserve grew stronger. This sentiment prevailed as Fed Chair Jerome Powell commenced his two-day testimony before Congress, suggesting that rate cuts might be warranted later this year.
Powell’s Testimony Drives Dollar Lower
Fed Chair Powell’s remarks on Wednesday, indicating the likelihood of rate cuts if economic conditions align with expectations, contributed to the dollar’s decline. Powell is set to continue his testimony before a Senate panel, with analysts expecting a consistent message emphasizing the Fed’s patience and potential future rate adjustments.
Euro Slips Ahead of ECB Meeting
In Europe, the euro dipped against the dollar to 1.0895 ahead of the European Central Bank’s meeting. German industrial data showing a significant drop in January’s orders intensified expectations for ECB action. Analysts anticipate subtle shifts in the ECB’s communication, possibly setting the stage for a rate cut in June.
Pound Strengthens on Positive Housing Data
GBP/USD rose to 1.2737, near a one-month high, following a fifth consecutive monthly increase in British house prices. Data from mortgage lender Halifax revealed a 0.4% rise in February, boosting the pound’s performance.
Yen Surges on Rate Hike Speculation
USD/JPY experienced a 0.9% decline to 147.97 as speculation intensified about a potential rate hike by the Bank of Japan. Comments from BOJ board member Junko Nakagawa on the country’s progress towards its inflation target sparked discussions of a shift in BOJ’s monetary policy stance.
Chinese Trade Data Impact Currency Markets
USD/CNY remained stable despite China reporting a larger-than-expected trade balance for the first two months of 2024. Stronger exports and imports hinted at a recovery in China’s trade-dependent sectors. Meanwhile, AUD/USD rose 0.4% to 0.6588, buoyed by positive trade figures from Australia and its major trading partner, China.
