The U.S. dollar remained stable on Wednesday as investors exercised caution ahead of Federal Reserve Chair Jerome Powell’s congressional testimony, alongside key events such as the European Central Bank rate decision and U.S. jobs data later this week. In the cryptocurrency realm, bitcoin saw a minor uptick but stayed below its recent record high reached during a volatile overnight session.
With no significant catalysts, the dollar maintained a narrow range, following a slight overnight slip on data indicating a slight slowdown in U.S. services industry growth last month.
The upcoming February U.S. jobs report on Friday is poised to impact rate outlooks, potentially rattling markets if it surpasses expectations. Powell’s congressional testimony is also anticipated, where he is likely to reiterate the Fed’s stance of awaiting further data before considering rate adjustments.
According to Carol Kong, a currency strategist at the Commonwealth Bank of Australia, Powell’s reaffirmation of the Fed’s stance on core inflation and the economy is unlikely to sway current market expectations of a June start to the FOMC’s rate cut cycle, thereby limiting the USD’s impact.
Market indicators currently suggest a 60% chance of a rate cut in June, according to the CME FedWatch tool.
The dollar index, measuring the greenback’s strength against six major currencies, hovered around 103.84.
Meanwhile, the euro edged slightly down to $1.0846 as traders prepared for the ECB’s interest rate decision.
The focus will be on the ECB’s clues about potential rate cuts and updates to economic projections, although Charu Chanana, head of currency strategy at Saxo, doesn’t expect a clear dovish message given the eurozone’s resilient inflation.
Sterling was slightly down at $1.2696 ahead of the British budget announcement on Wednesday.
The Australian dollar held steady around $0.6502 following GDP data reflecting modest growth in the fourth quarter, reinforcing the case for rate cuts.
The kiwi slipped slightly to $0.6081.
The dollar maintained its position against the yen at 150.04, after pulling back from last week’s high of 150.85.
Additionally, investors kept a close watch on bitcoin, which surged to a record high before experiencing a sharp retreat overnight.
Currently, bitcoin is up 0.15% at $63,414, as investors take a breather amid ongoing market dynamics.
