The Dollar is firm and “could well see big gains in the days and weeks ahead,” says Martin Miller, a market analyst at Reuters, who says the Dollar index – a broader measure of USD performance – is in a bullish technical setup.
Pound-Dollar has fallen 0.33% on the day and is quoted at 1.2646 at the time of writing, while Euro-Dollar is lower by a similar margin at 1.0683.
The Dollar is bid ahead of potential euro-centric risks dominated by the weekend elections in France that could prompt the European Central Bank to cut interest rates further in the coming days.
According to analysts we follow, the Bank of England is expected to cut interest rates as soon as August. Meanwhile, several Federal Reserve officials have warned they won’t be rushed into cutting interest rates this year.
“Fed officials remain hawkish,” says Dr. Win Thin, Global Head of Markets Strategy at Brown Brothers Harriman. The divergence in interest rate policy between the U.S. (higher rates for longer) and the UK and Eurozone supports the Dollar.
She also revealed that she is one of several Federal Reserve policy setters who sees no cuts this year, making her one of four Fed policymakers who think rates will remain unchanged.
According to projections released by the Fed on June 12, seven of her colleagues see one cut, and eight see two cuts.
“I remain willing to raise the target range for the federal funds rate at a future meeting should progress on inflation stall or even reverse,” said Bowman.
The Fed’s Lisa D. Cook was more inclined to entertain a potential cut, saying, “with significant progress on inflation and the labor market cooling gradually, at some point it will be appropriate to reduce the level of policy restriction to maintain a healthy balance in the economy.”
She added the timing of any such adjustment will depend on how economic data evolve and what they imply for the economic outlook and balance of risks.
The market continues to see November as the most likely meeting for a cut, though there are 70% odds of a cut in September.
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