The US Dollar gives back its opening gains and flips on its head during the European trading session on Thursday.
At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.1% lower to near 100.70 after falling from its intraday high of around 101.00
The Greenback faces selling pressure as investors doubt whether the Federal Reserve (Fed) will hike interest rates in the near term to grip over high United States (US) inflation, being under political pressure. ING’s Chris Turner also characterizes “last night’s FOMC press conference” as “a little confusing,” but notes that the market reaction was clear enough: investors concluded that “the Fed was not going to be as tough on fighting inflation as initially thought and might try to wriggle through this period of high inflation without hiking.” In the monetary policy announcement on Wednesday, the Fed kept interest rates steady in the range of 3.50%-3.75% and warned upside inflation risks. Fed Chair Kevin Warsh said in the press conference that the central bank is committed to bring inflation down and won’t to act if needed.
On Monday, US President Donald Trump said Fed Chairman Kevin Warsh to lower interest rates, adding that there was a good inflation report recently, costs were falling rapidly and that prices should drop significantly once the Gulf War ends. The scenario of the Fed refraining from reducing interest rates despite inflation remaining higher raise questions over the credibility of the central bank. Brown Brothers Harriman’s Elias Haddad highlights that the Dollar’s latest setback reflects a reassessment of the Fed’s near-term policy path and its communication.