The Dollar Rises Before Powell’s Speech

The Dollar Index (DXY) follows the dollar versus a basket of six other currencies. It rose 0.2% to 108.623 at 03:10 ET (07:10 GMT), just under its highest level in two decades, on track for a 0.4% weekly increase. Traders will concentrate on Powell’s speech, at 10:00 ET (14:00 GMT), for any insight into how aggressively the Fed still intends to raise interest rates to curb inflation running at 40-year highs.

A series of Fed policymakers have recently highlighted the importance of the U.S. central bank getting inflation under control.

St. Louis Federal Reserve President James Bullard was the most delinquent on Thursday. He expects high inflation to be more tenacious than many expect, and interest rates are not yet high enough to curtail price pressures.

This indicates that Powell will maintain a hawkish stance, presumably pointing to another hike of 75 basis points in September, which can only further help the dollar.

Other Currencies

Subsequently, EUR/USD dropped 0.2% to 0.9958, dropping under parity as Europe’s energy crisis sapped trust in German households.

The forward-looking GfK consumer confidence index for Europe’s biggest economy dropped to a record low of -36.5 in September from a downwardly adjusted -30.9 in August. That’s well under its previous troughs, either during the Great Recession in 2009 or at the beginning of the pandemic in 2020.

GBP/USD dropped 0.3% to 1.1793, not far from its higher than two-year low of 1.1718 hits early in the week, with rocketing energy prices expected to push the country’s economy into a protracted recession.

U.K. households face a peak of about 80% in their electricity and gas bills from October behind the national energy market regulator Ofgem’s price cap nattily again.