By Peter Nurse
Investing.com – The U.S. dollar edged lower in early European trade Thursday, but remained elevated as Federal Reserve Chair Jerome Powell again pointed to further interest rate hikes to tackle inflation.
At 03:10 ET (08:10 GMT), the
Dollar Index
, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 105.543, remaining near its three-month peak of 105.880 hit in the previous session.
Powell
returned to Capitol Hill on Wednesday for the second day of his semi-annual testimony, this time in front of the House Financial Services Committee.
He repeated his previous comments that the U.S. central bank will likely need to raise
interest rates
more than expected, and possibly in larger steps, as recent economic data had proved to be stronger than expected, pointing to persistent inflationary pressures.
He did make the concession that the debate of future rate hikes, including the expected increase in March, was still underway and would be data-dependent.
This brings Friday’s official
jobs report
firmly into focus, especially after last month’s blockbuster report, and U.S.
jobless claims
data later on Thursday will act as a precursor.
Powell’s comments have pushed the
2-year
U.S. Treasury yield above 5.5%, at a 16-year high, while the
2-10-year
curve has inverted close to 110 basis points and is prompting growing fears of a Fed-induced recession.
“We cannot really look for a broad dollar decline until that disinflation story returns and acute U.S. yield curve inversion breaks by the short end coming lower,” said analysts at ING, in a note.
Elsewhere,
EUR/USD
rose 0.1% to 1.0555 and
GBP/USD
rose 0.1% to 1.1848, both recovering from their multi-month lows after the dollar edged lower.
USD/JPY
fell 0.4% to 136.87, retreating from a near three-month high,
AUD/USD
rose 0.4% to 0.6612, and
USD/CNY
rose 0.3% to 6.9734, close to the widely-watched 7-per-dollar level after weaker-than-expected
inflation data
showed a hesitant Chinese economic recovery.
USD/CAD
fell 0.1% to 1.3794 the day after the
Bank of Canada
suspended its monetary tightening, keeping its key overnight interest rate on hold at 4.50%.
