(Corrects day of release of U.S. PCE deflator in paragraph 11)
By Kevin Buckland
TOKYO :The U.S. dollar attempted on Monday to pull itself up from a four-week low on the euro after a dovish pivot from Federal Reserve Chair Jerome Powell sent it tumbling more than 1 per cent.
The greenback added 0.2 per cent to $1.1699 per euro early in the Asian day, but remained not far from Friday’s low of $1.174225, a level not seen since July 28.
It rose 0.1 per cent to $1.3502 versus sterling following a 0.8 per cent slide in the prior session. It added 0.4 per cent to 147.46 yen, clawing back part of Friday’s 1 per cent tumble.
The risk-sensitive Australian dollar briefly leapt to a one-week high of $0.6523 on Monday before pulling back to trade slightly down at $0.6484. In the previous session, it surged 1.1 per cent.
Powell in a closely watched speech at the Fed’s annual Jackson Hole symposium on Friday opened the door to an interest rate cut at the central bank’s September meeting.
“Downside risks to employment are rising,” he told an audience of international economists and policymakers. “And if those risks materialize, they can do so quickly.”
Traders are now pricing in 80 per cent odds of a quarter-point rate cut at the September 17 policy meeting, and a cumulative 48 basis points of reductions by year-end, according to LSEG data.
Traders had ramped up bets on a September cut early this month after an unexpectedly weak monthly payrolls report, but hotter-than-expected producer price inflation and strong business activity surveys forced a paring back in the run-up to Jackson Hole.
“Chair Powell’s Jackson Hole message cleared the market’s low bar for dovishness following a steady erosion in Fed cut pricing,” Goldman Sachs analysts wrote in a client note.
“It will be up to the data to determine the pace and depth of cuts.”
Key upcoming data points include the Fed’s preferred inflation gauge, the PCE deflator, on Friday, and monthly payrolls figures for August, due on Friday of next week.
The dollar has been under additional pressure in recent weeks as U.S. President Donald Trump’s attacks on Powell and other Fed policymakers raised concerns about central bank independence.
Fed Governor Lisa Cook became Trump’s latest target last week, and on Friday he said he would fire her if she does not resign over allegations about mortgages she holds in Michigan and Georgia.
Trump has repeatedly criticized Powell, first because he has not cut rates this year, and more recently over cost overruns on a renovation of the Federal Reserve building.
