Since Jerome Powell’s (Chair of the Federal Reserve) negative tone during his statement on Wednesday, the dollar has struggled to find any real foothold against its major currency counterparts, having already lost ground against the pound and EUR/USD close to breaching 1.13 interbank rate for the first time since the start of the month.

Currency Pair% Change (Month)Difference on £200,000
US Data

Powell highlighted flattening inflation levels as a real concern whilst refusing to be drawn into commenting on a potentially destabilising jobs market.

His tone appears to have convinced the markets the FED may slash their interest rates imminently, essentially sapping any short term appetite away from the dollar for the time being.

This trend was reflected in yesterday’s trading as despite positive pickups in inflation levels, the dollar index has continued to tick lower. In fact, core consumer prices jumped by 0.3% , the highest increase in nearly 18 months. Those with a US dollar requirement may also want to take note of the slight tightening of the US labour market too with a considerable rise in Jobless claims up to 1.723M for June.

Policymakers for the FED are due to meet on the 30th of this month and are expected to downgrade their inflation projections for 2019, it will be interesting to see if these numbers influence the outcome.

Will the US dollar end the week even cheaper?

This afternoon’s producer price index will shed further light on inflation levels that Jerome Powell alluded to, although it would appear the markets have already made up their mind that intervention from the FED is now necessary to see a tangible shift in trends. Next week could well be a different story with the Fed’s Bostic due to speak followed by key Retail Sales data for June released on Tuesday.

These releases have been on the up since February and could help the dollar finally recover some ground should yesterday’s positive figures filter through.

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