The US dollar weakened again today, Wednesday, February 8, 2023 after the announcement delivered by Fed Chairman, Jerome Powell, which failed to provide new signs. Powell failed to give a new sign regarding the hawkish push to the labor market in the US. This led investors to bet that interest rates are unlikely to rise too high. At a joint question and answer forum with the Economic Club of Washington which took place on Tuesday, Powell admitted that interest rates need to move higher than expected if economic conditions are still strong. However, he reiterated that he feels the disinflationary process is ongoing. Sterling rose by 0.06% to $1.2057, and rebounded from Tuesday's lowest level of $1,196. Similarly, the Euro data rose higher by 0.04% to $1.0732, after previously having plunged $1.0669 since Jan. 9. 

 

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US Dollar Development

 


Pepperstone's chief research officer, Chris Weston, said that Powell did not necessarily say the right thing. Chris also explained that we are actually used to the idea issued by the Fed which currently relies on data. According to him, the market and central banks are in a position where they only focus on observing data, so for now they are still less sensitive to respond to Fed officials, but only focus on data. 

US Dollar Development - Dollar Impact Backwards


On the other hand, the US dollar index returned to stability at 103.31 after previously slipping 0.3%. The greenback had a brief rally after a jobs report from the blockbuster last Friday that showed that the NFP surged up by 517,000 during last month's jobs. That sent the U.S. dollar to a one-month high of 103.96 on Tuesday, as investors raised expectations on how far the Fed will raise interest rates. 


Futures pricing shows that the market does expect the Fed funds rate to break above 5.1% in June. Elsewhere, the Japanese yen climbed 0.16% to 130.88 per dollar, after previously jumping up to 1.2%. The Japanese government is currently considering submitting to their parliament the next BOJ governor candidate and 2 other deputy governors next week. The kiwi rose 0.02% higher to $0.6326, while the Aussie also rose 0.11% to $0.6967, after jumping 1% on Tuesday. As expected, the BoA on Tuesday raised its interest rate by 25 points. They reiterated that further hikes would be necessary, and pointed to a policy that exceeded hawkish compared to people's forecasts. 


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