The U.S. dollar remained steady on Wednesday, with traders cautious ahead of Federal Reserve Chairman Jerome Powell’s congressional testimony and key economic events. Market focus will be on the European Central Bank’s upcoming interest rate decision and U.S. jobs data due later in the week.
Bitcoin saw a slight increase but failed to surpass the record high it reached in a volatile overnight session. The digital currency has seen a significant rally since October, driven by investor interest in U.S. exchange-traded cryptocurrency products and anticipation of a potential global interest rate cut.
The dollar was minimally volatile, trading in a narrow range after a slight decline. This was in response to a report from the Institute for Supply Management (ISM) showing a slight slowdown in growth in the US services sector in February. Even so, the dollar has gained 2.4% this year, bolstered by better-than-expected US economic data. However, its gains have paused recently as investors await more definitive guidance on Federal Reserve policy.
Friday's US jobs report is highly anticipated, with the potential to significantly influence market dynamics. An unexpectedly strong report could contribute to the dollar's gains this year.
Jerome Powell’s testimony before Congress is expected to confirm the Fed’s stance of waiting for additional data before considering any rate cuts. Carol Kong, a currency strategist at Commonwealth Bank of Australia (OTC: CMWAY), noted that the reiteration of that stance is unlikely to change market expectations for a rate cut starting in June, and therefore should have limited impact on the U.S. dollar.
Market expectations reflect a roughly 60% chance of a rate cut in June, according to the CME FedWatch tool. The dollar index, a gauge of a basket of six major currencies, was little changed at 103.82.
In Europe, the ECB is widely expected to keep interest rates on hold at a record 4% at its policy meeting on Thursday. Markets will be looking for clues on the timing of a potential rate cut and the central bank’s updated economic forecasts.
The euro held steady at $1.0852, while the pound edged lower, trading at $1.2695 ahead of Britain's budget announcement on Wednesday. The Japanese yen traded around 149.92 per dollar, steadying after the dollar recently retreated from last week's peak of 150.85 against the yen. Reuters contributed to this article.
Source: Investing
