The United States Dollar Increased Ahead Of Fed’s Testimony

The greenback paused for breath on June 22 as traders are waiting for the testimony of Fed Chair Jerome Powell for guidance after a surprise shift in the Federal Reserve’s policy outlook. The dollar gained sharply since the central bank last week flagged sooner-than-expected rate hikes.

Nevertheless, the dollar declined on June 21 to hand back a little bit of that rise. Against the euro, the greenback nursed an overnight loss of about 0.4% to steady around $1.1909. The dollar held at 110.31 yen. The dollar index, which tracks the currency against the basket of main peers was steady at 91.915 after a loss of about 0.5% on Monday.

The Australian and New Zealand dollars fell, as the Aussie dropped 0.2% to $0.7527 and the kiwi fell 0.15% to $0.6978. Over the next several weeks, the Aussie could decline to around 74 cents and the kiwi to around 68 cents. But they might recover as the U.S. dollar charts a “raggedy” rise on the back of a strong economic recovery.

Elsewhere on June 22, the British pound steadied at $1.3917, holding on to its overnight bounce as investors look forward to the country’s economy reopening further on July 19.

Dollar, and the Federal Reserve

In the medium term, investors and analysts will be keenly focused on the U.S. jobs market. Its performance is likely to influence the Fed’s decisions. In the nearer future, all eyes are on Jerome Powell’s who appears before Congress from 18:00 GMT. In prepared remarks, Chair Jerome Powell noted sustained labor market improvement as well as the current increase in inflation.

On June 21, hawkish Fed officials such as St. Loius Fed President James Bullard as well as Dallas Fed President Robert Kaplan offered toned-down rhetoric.

New York Fed President John Williams made an interesting comment on June 21. He stated that it was too soon to shift policy. Williams expects inflation to ease from about 3% this year to close to 2% and 2023, which is something markets are not so sure about.

Bitcoin, as well as other cryptocurrencies, declined on June 21 due to China’s decisions. Technical factors also affected their prices. On June 22, they held above May lows, with bitcoin at $31,535, but the mood did not improve.