US dollar weakened on dovish comments by Fed officials

Due to dovish remarks made by Fed officials, the US dollar has declined, and the Dollar Index (DXY) has only halfway recovered.

The dollar’s recovery from last week’s weakness is only halfway complete, as indicated by the Dollar Index (DXY). Later on Thursday, traders will be watching for cues and direction from Fed Chairman Jerome Powell.

The increase in weekly jobless claims is evidence that the US labour market is becoming more stale. The US dollar may depreciate versus the majority of major currencies as a result. Following a successful auction on Wednesday, the price of the US 10-year bond dropped from 4.610% to 4.519%.

Philadelphia Fed president Patrick Harker said that rates should stay higher for longer and that the fight against inflation is still ongoing. European Central Bank’s Luis De Guindos also made it clear that rate cuts were too premature to be factored in and saw risk for an inflation surge in the next months.

Atlanta Federal Reserve President Raphael Bostic and Thomas Barkin from the Richmond branch delivered dovish comments, saying that the US Fed rate is restrictive enough and a slowdown is coming soon. The US Treasury will have busy days as well, with two bond placements at less elevated rate levels: a 4-week bill and a 30-year bond auction.

Traders will brace for comments from US Federal Reserve Chairman Jerome Powell around 19:00 GMT, at a panel discussion on monetary policy for the IMF. Equities are painting a very binary view this Thursday, with Japan equities in the green with over 1% profit for the Nikkei and Topix, the Chinese Hang Seng flat, and European and US equities in the green.

The benchmark 10-year US Treasury yield trades at 4.55% after a successful allocation by the US Treasury earlier on Wednesday. The US Dollar Index (DXY) has partially made good after its weak performance at the end of last week, but the recovery does not look strong enough for the DXY to recoup all losses incurred by Friday.