Dollar Pares Some Losses Post CPI Data: Jay Powell Up Next

The focus on central banks ramped up on Thursday, with input from Mark Carney, ECB minutes from the latest policy meeting and a second appearance from Fed Chair Jay Powell on Capitol Hill. Dollar traders were also digesting a slew of better than expected US macro releases, which has helped to soften the blow on the dollar ahead of Jay Powell taking the stand.

A dovish Jay Powell in the previous session cemented market expectations for a Fed rate cut in July. The question is now not if the Fed will cut, but how deep will they go. The CME FedWatch tool showed an increase in expectations for a much deeper 50 basis point cut following Jay Powell's appearance. We still think that the Fed won't go that far. A 50 basis point cut is sending out the wrong message; one of panic rather than insurance.

Furthermore, given that inflation increased ahead of forecast on a monthly basis and core inflation ticked up above the 2% target in June, a 25 basis point cut is broadly being considered more than adequate.

The dollar extended losses in early trade and has stabilised following the inflation reading. Investors will turn their attention back to Powell for his second session this afternoon. Will he try to row back some of the damage done? This wouldn't be completely unheard of, Powell employed a similar tactic the last time he appeared before Congress.

Euro pares gains on dovish ECB minutes

The euro was unable to take advantage of the weaker dollar, owing to dovish calls sounding from the ECB nest. The minutes from the latest ECB Governing Council meeting showed that the ECB stands ready to unleash stimulus measures should it be required, amid heightened uncertainty over the health of the eurozone economy. Needless to say, the euro pared earlier gains.

Pound rallies despite Carney's warnings

And then there was the pound. The pound capitalised on the weakness of both the euro and the US dollar, extending gains versus its peers. Clearly the case of "best of a bad bunch". Whilst the ECB and the Fed are poised to cut imminently, the BoE still has time on its side ahead of a potential no deal Brexit come 31st October. Despite warnings from Carney over the damage of a no deal Brexit, the pound pushed to a high of $1.2571.

After spending the morning in positive territory, the FTSE weighed down into the red, struggling under the stronger pound. A stronger start on Wall Street and a cautiously strengthening dollar could see the UK index close on higher ground for the first time in a week.

CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD: bears pressuring, 1.0980 critical support

Risk aversion took over the FX board on Friday, weighing on high-yielding assets. The EUR/USD pair, finished the week just a handful of pips above the 1.1000 figure amid mounting tensions between the US and China.


GBP/USD: at risk of losing more ground in the short-term

The GBP/USD pair advanced up to 1.2581, it highest in over two months, but was unable to sustain gains, ending the week around 1.2470. Cable could keep losing ground on a break below 1.2460, the immediate support.


USD/JPY: at a bring of breaking lower

Fresh risk-off flows resulted in the USD/JPY pair trimming weekly gains on Friday, ending the week at 107.55. The pair barely holding above a critical Fibonacci support at 107.45. Japan’s National inflation steady at lows in August.


Top 3 price prediction Bitcoin, Ripple, Ethereum: Ethereum points to the Moon as Bitcoin takes a break

ETH/USD exceeds $220 and is bidding to lead the market. Bitcoin sets a bear trap and recaptures $10,000. XRP stalls between technical levels and fails to consolidate $0.30.

Read more

Gold climbs further beyond $1500 mark, lacks follow-through

Gold edged higher for the second consecutive session on Friday, albeit remained well within a familiar trading range held over the past two weeks or so.

Gold News

Forex Majors