The dollar loses positions; Powell’s speech becomes important

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The US dollar loses positions at the beginning of the trading day on Monday in Europe, as the appearance of the chairman of the Federal Reserve Jerome Powell before the US Congress has provoked caution at the beginning of the week.

At 9:00 am (CET), the Dollar Index, which tracks the currency’s performance against a basket of six other major currencies, fell 0.1 percent to 104.403 after posting a weekly loss last week for the first time since January.

Recent statements by the Federal Reserve’s monetary policymakers have pointed to further interest rate hikes to combat inflation, which is proving more persistent than expected.

This continued over the weekend; the president of the Federal Reserve Bank of San Francisco, Mary Daly, stated that “to put this episode of high inflation behind us, further monetary policy tightening will probably be necessary for longer.”

The president of the Federal Reserve Bank of Richmond, Thomas Barkin, said on Friday that he could foresee a scenario in which the central bank push U.S. benchmark interest rates to the range of 5.5%-5.75%, one percentage point above the current range.

Attention is focused on Powell, who will present the Fed’s semi-annual monetary policy report to the Senate on Tuesday and to the House of Representatives on Wednesday.

Traders fear that Powell will try to temper expectations of a possible rate hike at the end of the month.

The Fed slowed the pace of rate hikes to 25 basis points at its last meeting on Feb. 1, following December’s 50 basis point hike following four consecutive 75 basis point hikes.

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For its part, the pair EUR/USD is up 0.2% to 1.0653, after rising 0.8% last week after the president of the European Central Bank, Christine Lagarde, indicated that the central bank’s interest rate hikes may have to continue beyond the 50 basis point hike scheduled for March.

January retail sales in the euro area will be published on Monday and everything indicates that they will show growth of 1.0% in the month as a whole, which represents an improvement over the fall of 2.7% in the previous month.

The pair USD/CNY It is pointing to a rise of 0.1% to the level of 6.9174, falling the yuan after the Chinese government announced this weekend that it has set the 2023 GDP target at 5%, a more cautious stance than expected by Beijing regarding an economic recovery this year.

The pair GBP/USD descends to the level of 1.2037, the AUD/USD It leaves 0.2% to 0.6754, while the USD/JPY down 0.1% to 135.69, ahead of the Bank of Japan on Thursday, in which the bank is expected to keep interest rates at record lows.

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