Home ForexArticles Forex market calms ahead of Powell speech, bitcoin resumes rally By Reuters

Forex market calms ahead of Powell speech, bitcoin resumes rally By Reuters

by SuperiorInvest

© Reuters. FILE PHOTO: In this illustration, representations of the cryptocurrency Bitcoin and the US dollar are seen, August 10, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Samuel Indyk and Brigid Riley

LONDON (Reuters) – The U.S. dollar fell slightly on Wednesday as traders stayed dry ahead of the first leg of Federal Reserve Chair Jerome Powell's congressional testimony and the European Central Bank's policy announcement on Thursday.

Meanwhile, Bitcoin was gaining strength again, although it remained below the record hit the previous day.

The absence of major catalysts kept the dollar under pressure, having fallen on Tuesday after data showed growth in the U.S. services industry slowed last month.

Traders were now awaiting the first day of Fed Chair Powell's testimony before Congress on the state of the US economy, where he is expected to stress that the Fed will wait for more data before making any rate cuts.

“I think he will talk about previous comments that they depend on the data and that they could cut rates at an upcoming meeting without specifying one in particular,” said Stefan Mellin, chief currency strategy analyst at Danske Bank.

“We think there will be a synchronized easing cycle that means the rate gap between Europe and the US will remain. That's positive for the dollar in our view,” Mellin added.

Markets are pricing in around 90 basis points of easing from both the Federal Reserve and the European Central Bank this year, and both are expected to begin cutting rates in June.

Against the dollar, the euro rose 0.1% to $1.0873, as traders also prepared for the ECB's interest rate decision later on Thursday.

The central bank is expected to leave rates at a record 4%, focusing on clues about when cuts may begin.

“We think they're going to echo their message again and tomorrow it's not going to change the picture,” Danske Bank's Mellin said.

“ECB is on track to ease in June.”

The yen strengthened amid reports that some Bank of Japan board members believe it would be appropriate to raise rates from negative territory at the March meeting. The dollar was last down 0.2% at 149.75 yen.

Analysts mostly expect the Bank of Japan to abandon its negative interest rate policy at its April meeting, if Japan's spring wage negotiations result in solid wage increases.

Sterling rose as high as $1.2728 ahead of the UK budget announcement on Wednesday, and reports on Tuesday suggest cuts to national insurance are likely, but with markets still haunted by unfunded tax cuts from the mini-budget September 2022, the room for maneuver remains small. .

“Although the pound barely reacted to yesterday's rumors, this may change if there are significant tax cuts,” said Michael Pfister, currency analyst at Commerzbank (ETR:).

“With the country's finances already stretched thin, the market may once again wonder if this is too good.”

The Australian dollar rallied in the Asian afternoon, ignoring gross domestic product data that showed the economy grew just 0.2% in the fourth quarter, strengthening the case for rate cuts. The coin was last up 0.2% at $0.65195.

That left the , which measures the currency against a basket of six others, down about 0.1% to 103.64.

Markets are also keeping a close eye on the world's largest cryptocurrency, bitcoin, after it hit a record high on Tuesday before pulling back sharply.

It was last up 6% at $67,199. has rallied strongly since October as investors poured money into U.S. spot exchange-traded crypto products and on the prospect that global interest rates could fall.

Ether, the second-largest cryptocurrency, jumped more than 9% to its highest level since January 2022 at $3,867.70.

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