The dollar regained its footing on Wednesday and inched higher after a slew of Federal Reserve speakers left the door open to further rate hikes, as traders looked to a speech from Chair Jerome Powell on the central bank’s future policy path. The greenback, which tumbled last week in the wake of the Fed’s decision to hold its policy rate steady and on data pointing to a cooling U.S. labour market, has found a floor as markets remain at odds over whether a peak in U.S. rates has been reached and how soon the Fed could begin easing monetary conditions. Futures point to a roughly 17% chance of another hike by January, but are pricing in a 21% chance that rate cuts could come as early as March.
“We’ve seen a slight recovery in the U.S. dollar, but this is to be expected following such a sharp selloff,” said Matt Simpson, senior market analyst at City Index. “We’re also seeing the obligatory hawkish pushback from Fed speakers this week, as they try to steer market expectations away from rate cuts.”