(Bloomberg) -- A dollar gauge rose to day’s high after Federal Reserve Chair Jerome Powell highlighted the amount of uncertainty during his press conference after keeping interest rates unchanged. The Australian dollar was the best performers in the Group of 10.
- The Bloomberg Dollar Spot Index rose more than 0.1% as Powell said that officials expect a meaningful amount of inflation in coming months
- “Clearly he remains pretty hawkish,” said Brad Bechtel, global head of FX at Jefferies. “The market was looking for a slight dovish tilt to the Fed prior to the events in Iran”
- The comment about meaningful inflation “signals to markets that the central bank may be more concerned about upside risks to inflation rather than downside risks to labor figures and economic growth – all together, more hawkish than anticipated,” said Helen Given, a foreign-exchange trader at Monex Inc.
- This is a fourth day of advances for the dollar index, making it the longest winning streak since March
- The Fed statement reflected that officials still see two cuts this year, they downgraded their estimates for economic growth this year while lifting their forecasts for unemployment and inflation; it now sees fewer rate cuts in 2026 and 2027
- About Fed seeing less cuts in the next two years “was not expected,” wrote Sarah Ying and Noah Buffam at CIBC Capital Markets.
- “We are more likely to see less as opposed to more” of Fed rate reductions this year, which together with a rise in geopolitical risks will be pushing the dollar higher, they said, while uncertainty over tariffs and potential spike in term premia from Trump’s OBBB would weigh on the greenback
- They said they turned less confident about the dollar path in the coming months as a result
- Earlier Wednesday, data showed applications for US unemployment benefits ticked down last week, stabilizing near the highest levels in eight months
- President Donald Trump declined to say whether the US plans to join Israel’s offensive
- AUD/USD rose 0.5% to 0.6510
- USD/JPY declined 0.2% to 145.05
- GBP/USD fell 0.1% to 1.3422; UK consumer prices rose 3.4% y/y last month, higher than the 3.3% increase estimated by economists in a Bloomberg survey
- The Bank of England will decide on its interest rate policy on Thursday
- “Given the current inflation outlook and the central bank’s cautious stance, a pause in the easing cycle appears likely for now,” Geoffrey Yu, senior macro strategist at BNY, said about the BOE
- EUR/USD was little changed, trading near 1.1482
Reporting by Anya Andrianova and Vassilis Karamanis
