The U.S. dollar hovered near multi-week lows against major currencies on Tuesday as traders awaited testimony from Federal Reserve Chairman Jerome Powell for clues on the direction of interest rates, still impacted by Friday’s unexpectedly weak jobs report.
The euro held firm after Monday’s wild swings as investors accepted that France’s parliament is in limbo, signaling a possible political deadlock but easing many of the fiscal concerns stemming from a victory for the far right or left.
The US Dollar Index, which tracks the greenback’s value against the euro, pound, yen and three other major currencies, was flat at 104.99 in early Asian time, close to the previous night’s low of 104.80, its lowest in three-and-a-half weeks.
The index fell 0.9% last week, in part after Friday’s monthly jobs report spurred expectations that the Fed will soon start cutting interest rates.
Traders now have about a 76% bet that a rate cut will come at the September meeting, according to CME Group’s FedWatch tool, up from 66% a week ago, with further cuts expected by December.
Powell will give two days of testimony before Congress, beginning his testimony before the Senate late Tuesday and then the House of Representatives on Wednesday.
Market participants said Thursday’s consumer price index could also be very important as recent figures have shown a decline in the consumer price index, which was unexpectedly high at the start of the year.
“Attention will be focused on how Powell communicates the risks of stubborn inflation and unnecessary labor market deterioration,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank, who expects the U.S. dollar to weaken in the longer term.
Meanwhile, markets are “fairly optimistic” about the French poll results and “see political deadlock and a resulting high degree of fiscal policy stagnation as the most likely way forward for France, and a more moderate scenario than any other,” Atrill added.
The euro was little changed at $1.0827, not far from Monday’s nearly four-week high of $1.0845. The euro had fallen to a low of $1.07915 on the same day.
The pound was trading flat at $1.28085 after rising to $1.28455 on Monday, its highest since June 12.
The yen was steady at 160.91 yen to the dollar, rebounding from Wednesday’s nearly 38-year low of 161.96 yen to regain balance this week.
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