London (awp/afp) – The dollar appreciated on Tuesday against many currencies, driven by statements by the president of the American Federal Reserve (Fed) in the direction of a lesser reduction in key interest rates than that anticipated by investors.
Around 11:55 a.m., the greenback rose by 0.37%, to 1.1093 dollars per euro against the single currency. It also appreciated against the British pound (+0.36%) and the Swiss franc (+0.10%).
In a speech to the National Association for Business Economics on Monday, Fed Chairman Jerome Powell stressed that the Fed was not following a “preset course” but suggested that two one-year rate cuts quarter point could still happen this year if the economy develops as expected.
These comments contrast with the expectations of operators, who are counting on reductions of at least 0.75 percentage points in total by the end of the year.
“The probability of a 0.5 percentage point rate cut” in one go, at the next November meeting, “has largely declined after Jerome Powell’s cautious speech on Monday,” insists Ipek Ozkardeskaya, analyst at Swissquote, specifying that “the chances of such a scenario have fallen from 55% to 38%” in investors’ estimates.
Between inflation and unemployment, “the risks (on the economy, editor’s note) are twofold and we will continue to take our decisions meeting by meeting”, insisted the head of the Fed in his speech.
At the same time, investors expect a faster rate cut from the European Central Bank (ECB).
“Rather than returning to a level of 2.00-2.50% by the end of 2025, we expect them to be reached six months earlier,” explain Deutsche Bank analysts.
For Ms Ozkardeskaya, “the euro should be kept under pressure against the dollar”, with the greenback stopping its depreciation.
The publication of a US employment report on Friday could, if the results are positive, encourage the recovery of the dollar against other currencies, as the fight against inflation by maintaining high rates would become the priority economic.
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