Dollar hits three-week high ahead of Powell, FOMC minutes
FILE PHOTO: An employee counts U.S. dollar bills at a money exchange office in central Cairo, Egypt, March 20, 2019. REUTERS/Mohamed Abd El Ghany/File Photo
By Richard Leong
NEW YORK (Reuters) - The dollar inched up to a three-week high against a basket of currencies on Tuesday as traders await clues in Federal Reserve Chairman Jerome Powell's testimony before Congress and minutes from the Fed's last policy meeting on possible rate cuts.
The greenback has strengthened versus most major currencies in the aftermath of a government report last Friday that showed surprisingly strong domestic hiring in June.
The 224,000 job gain last month scaled back bets the U.S. central bank would embark on a deep 50-basis point rate decrease at the end of the month, although traders are still positioned for a more modest 25 basis-point decrease.
Amid U.S. President Donald Trump's browbeating, Fed policy-makers may eventually relent and lower borrowing costs due to modest wage growth and sluggish domestic inflation.
"What the market is seeking is clarity of what we are going to run into later this month," said Shaun Osborne, chief FX strategist at ScotiaBank.
Interest rates futures implied traders now only see about 3% chance of a 50-basis point rate cut at the end of July, down from 25% a week earlier, according to CME Group's FedWatch program.
"If there is no pushback on a rate cut (from Powell), a 25 basis-point cut is pretty much a given," Osborne said.
Ahead of Friday's jobs report, speculators shrank their bullish bets on the dollar to their lowest level since July 2018, based on U.S. Commodity Futures Trading Commission data released late on Monday.
(GRAPHIC-Bets on bold first rate-cut from the Fed: https://tmsnrt.rs/2XTkkpn)
In late U.S. trading, the index that tracks the greenback against six other major currencies <.DXY> was up 0.09% at 97.471 after touching 97.588, which was the highest since June 19.
Further gains for the dollar hinge on any clues on possible rate cuts in Powell's two-part testimony before Congress that begins on Wednesday, and in the minutes of the Federal Open Market Committee's previous meeting last month.
"This week’s FOMC minutes should remind us of the extent of the central bank’s dovishness. Their concerns center around trade and inflation," BK's Lien and Schlossberg said.
Against the dollar, the euro was little changed at $1.1209 after hitting $1.1194, which was the lowest in early three weeks.
The greenback
The nomination of IMF Chairwoman Christine Lagarde as the new head of the European Central Bank has stoked traders' worries that the ECB would be inclined to ease monetary policy faster than its U.S. counterpart.
Elsewhere, the British pound
(GRAPHIC-U.S. dollar: speculative positions: https://tmsnrt.rs/2G770qS)
(Additional reporting by Olga Cotaga in LONDON; Editing by Kirsten Donovan, Nick Zieminski and Diane Craft)
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