The dollar climbed higher on Wednesday as markets braced for comments from Federal Reserve Chair Jerome Powell. He is likely to renew a commitment to the ultra-easy policy.
The dollar reversed declines against riskier currencies. Pandemic recovery hopes got a lift from the International Monetary Fund upgrading its forecast for 2021 global growth.
The rise in Treasury yields had supported the dollar at the start of this year. It fell overnight over caution about the eventual size of and delays to President Joe Biden’s $1.9 trillion fiscal stimulus package.
Powell is set to speak at a news conference after the central bank’s two-day policy meeting until Wednesday.
The U.S. economy is still distant from the Fed’s inflation and employment goals. It is too soon to discuss altering monthly bond purchases. This was according to the Fed Chair earlier this month in a web symposium with Princeton University.
In Europe, the dollar index ticked up 0.1% to 90.284 on Wednesday, after a 0.2% decline.
The gauge has been consolidating since rebounding from a nearly three-year low of 89.206 at the start of January.
The British pound rose to its highest since April 2018 at $1.3753 before trading slightly lower at $1.3724.
The Australian dollar slipped 0.2% to 77.30 U.S. cents, paring the 0.5% rally on Tuesday. Moreover, the euro slipped 0.1% to $1.2146.
The Pound to Euro (GBP/EUR) exchange rate is trending higher in the forex market this morning. Data indicates that German consumer confidence continues to fall.
Up roughly 0.3% from today’s opening levels, the GBP/EUR exchange rate is trading at around €1.1327.
The Euro (EUR) is on the defensive against the Pound (GBP).
German consumer morale has declined going into February, with the confidence index tumbling from –7.5 to –15.6. This was well under consensus estimates of a more modest slide to –7.9. Since June, this was its worst reading by far.
The deterioration in consumer sentiment has been driven by coronavirus concerns. Germany’s extended lockdown, as well as unemployment concerns sap confidence.
The latest survey showing a sharp drop in consumers’ willingness to spend money causes the most worrying for EUR investors. It is something which would further hamper Germany’s economic recovery.
Meanwhile, the Pound (GBP) was holding its ground this morning. News reported that Boris Johnson would seek to publish the criteria for easing lockdown next month.