Powell will likely reiterate in his Congress testimony today that there’s no rush for the Fed to cut rates and more evidence is needed to confirm that the downward inflation trend is persistent. The market has already accounted for this and will not react unless there’s a surprise.
As such, a bigger focus will be on tomorrow’s ECB meeting. The market expects rate cuts to begin in June, but analysts anticipate that the ECB will have a dovish tone. If confirmed, EUR/USD will lose strength.
AUD/USD strengthened as well during the European session despite mixed GDP data from Australia and is currently trading near the 0.6520 support level.
NZD/USD lacks clear direction and consolidates at 0.6100.
USD/CAD is awaiting the BoC monetary policy announcement today and the labor market data on Friday which could influence the pair’s direction. A special attention for today’s meeting will be on whether the BoC hints at rate cuts. If so, the CAD will soften.
USD/JPY dropped sharply after a report that some BoJ policymakers are considering a first rate hike in March, but didn’t break the 149.30 level of support. The fact that officials have differing views on rate hike timing didn’t help the pair.
This article was written by Gina Constantin at www.forexlive.com.