Dollar Edges Lower Ahead of Fed’s Powell Comments

Dollar Edges Lower Ahead of Fed’s Powell Comments
The employee of a currency exchange shop counts U.S. dollar banknotes in Ciudad Juarez, Mexico, on July 27, 2023. (Jose Luis Gonzalez/Reuters)

LONDON—The dollar edged lower on Friday, while the euro rebounded slightly after steep overnight losses, as traders weighed data showing inflation was easing and looked ahead to a talk later in the day by U.S. Federal Reserve Chair Jerome Powell.

Softer inflation data in both the United States and the eurozone on Thursday reinforced expectations that both central banks might be done raising interest rates in their battle against price rises and led traders to bet on earlier cuts next year.

Goldman Sachs on Friday said it now expected the European Central Bank to deliver its first rate cut in the second quarter of 2024, compared to an earlier forecast of a cut in the third quarter of next year.

Investors will have their sights trained on a talk due to be given by the Fed’s Powell later on Friday for any clues about the future path of interest rates in the U.S.

Currency movements were more muted on Friday, after month-end trades on Thursday contributed to bigger swings, analysts said.

The U.S. dollar index—which tracks the currency against six major counterparts—was last down 0.1 percent at 103.35, after clocking its weakest monthly performance in a year in November.

Mixed economic data across Europe failed to set the tone for the euro, with a survey showing a downturn in eurozone manufacturing activity eased slightly last month but remained deeply in the red. Britain also reported contraction in manufacturing, but an improved reading for a third straight month.

The euro was last up 0.1 percent at $1.08995, while sterling was up 0.2 percent at $1.26530.

The dollar dipped as much as 0.4 percent versus the yen and was last down 0.1 percent at 148.140 per dollar. The yen is on course for its third straight week of gains, pulling it away from the near 33-year low of 151.92 it touched in the middle of November.

Rising expectations of the Bank of Japan abandoning its ultra-easy monetary policy next year along with a drop in U.S. yields have buoyed the Asian currency in the past few weeks.

In cryptocurrencies, bitcoin continued to strengthen, gaining as much as 3 percent to a fresh 18-month high of $38,839.

By Iain Withers