USD weakened slightly against most of its major rivals in the European session on Wednesday as investors’ bets on interest rate cuts by the Federal Reserve this year stocked after yesterday’s statements of the U.S. central bank’s chairman Jerome Powell.
The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, fell 0.03% from the previous close to 105.10.
Speaking before the Senate Banking Committee on Tuesday, Powell noted that the recent reports indicated progress on inflation and expressed hope that more good data would strengthen the policymakers’ confidence that inflation is moving sustainably toward 2%. In addition, he highlighted the growing signs of a cooling labour market.
According to the CME FedWatch, markets now see a 75.2% probability that the Fed will deliver a 25-basis-point rate reduction in September. This would mark the first rate move since a hike in July 2023.
Markets now look for Powell’s testimony in front of the House Financial Services Committee later in the day and the U.S. June inflation report tomorrow, hoping to get more clues on the Fed’s policy path.