US Dollar Reaches One Month Peak As Focus On Powell’s Speech

On Tuesday, the US dollar climbed to a high of one month ahead of a speech by Jerome Powell, the chairman of the US Federal Reserve.

Investors will be scrutinizing his speech for any hint of how high the US central bank might push up the interest rates this year.

The dollar index

There was a 0.2% rise in the US dollar index, which measures the currency against a basket of its peers, as it climbed to 103.93.

This is the highest the currency has been since February 6th. The dollar index was last trading up at 103.91, which is a rise of 0.3%.

Investors will be interested in hearing what Powell has to say about the labor market in a speech that he is scheduled to make later in the day at the Economic Club of Washington.

This was after data in the last week showed a sharp increase in jobs growth, thereby puncturing the possibility of a tempered Fed.

Market analysts said that the Fed officials are going to make a deliberate effort to convince investors that the interest rates could climb higher than 5.25% and stay there until 2024.

The expectations

Analysts further said that the Fed Chair was expected to reiterate that underlying inflation pressures were still high and also talk about the strength of the labor market and its ability to withstand higher rates.

Before the jobs report was published on Friday, US interest-rate futures had expected the Feds fund rate to hit its peak below 5%, but now they expect it to do so at 5.1% in June.

The report on Friday surprised traders because they had been expecting the Federal Reserve to hit a pause on its hiking cycle. Meanwhile, it gave the greenback a solid boost.

There was a 0.5% drop in the euro against the US dollar to $1.0671 after it had dropped to a low of five weeks at $1.0670.

Currency analysts said that this was an opportunity for Powell to turn around some of the comments he had made last week on Wednesday that had resulted in a dovish stance.

But, they did not expect Powell to give any new message.

Other movements

Analysts said that there was still some way to go for the Fed, but they could not deny the positive signs in the pipeline, such as signs of deflation. But, the labor market could still be a problem.

There was a 0.4% drop in the Sterling against the US dollar to $1.1982 after it had dropped to a low of one month in the previous session at $1.1974.

This week, investors will be focusing on commentary from central bankers after what was considered a dovish outcome from the meeting of the Bank of England (BoE) in the previous week.

There was a 0.2% gain in the Australian dollar after it had climbed as much as 1%, with the RBA hiking the interest rate by 25 basis points and promising more hikes in the future.