The U.S. dollar strengthened further Wednesday, tacking on to its rally from the prior session, which came after Federal Reserve Chief Jerome Powell said he had become more upbeat on the U.S. economy since December.
What are currencies doing?
The ICE U.S. Dollar Index
rose 0.3% to 90.633 Wednesday, up from 90.379 late Tuesday in New York. The gauge rose 1.7% in February, marking its first positive month since October, and its best monthly performance since last February. The WSJ U.S. Dollar Index
was up 0.2% to 84.17 on Wednesday, ending the month up 1.1%.
fell to $1.2197, down from $1.2233 late Tuesday in New York, losing 1.7% on the month. The British pound
was buying $1.3769, down from $1.3908 late Tuesday. In February, sterling fell a whopping 3% against the buck.
Against the Japanese yen
, the dollar fell to ¥106.71 from ¥107.33 late Tuesday. On the month, the yen gained 2.3% against the dollar, making it the strongest of the greenback’s main rivals.
The buck was also up against its rivals in Canada
with one dollar buying C$1.2830, up 0.4%, and 0.9445 franc, up 0.6% from Tuesday, according to FactSet. On the month, the Canadian dollar weakened 4.2% against the dollar, while the Swiss franc was down 1.4%.
What is driving the market?
The dollar extended its gains Wednesday, following Tuesday’s congressional testimony by Powell. Among other things, Powell spoke in favor of the continued gradual policy normalization by the central bank, which is forecast to include three interest-rate increases in 2018, with the first coming in March.
However, the new Fed boss also highlighted that he thought the economic outlook had strengthened, leading analysts to read a potential fourth rate increase in between the lines.
Powell’s testimony will continue on Thursday.
Opinion: Powell’s first faux pas came quick
Elsewhere, flash consumer price inflation for the eurozone stood at 1.2% in February, in line with FactSet estimates, but below the previous level of 1.3%, which weighed on the euro. Core inflation stood at 1%, in line with forecasts.
What are strategists saying?
“In one breath, Fed chairman Powell said he wouldn’t prejudge changes to the Fed dot plot, but in the next he made it clear it’s going higher,” wrote Ashraf Laidi, head trader and strategist at Intermarket Strategy, on Wednesday about Powell’s testimony. “He was diplomatically non-committal on the forecast but then added a list of reasons why the economic outlook improved.”
“Powell’s upbeat assessment of the U.S. economy has driven a dollar rebound again,” said Hantec Markets analyst Richard Perry in a note Wednesday, adding that the new Fed boss “has a belief that inflation is now picking up toward the Fed’s 2% target, whilst wages are also now growing.”
What’s on the economic calendar?
U.S. fourth-quarter GDP was downgraded slightly to 2.5% from 2.6% before, data showed.
Chicago PMI data for February dropped to 61.9, down from 65.7 in January, marking a six-month low, while pending home sales fell 4.7% to 104.6 in January, which was its lowest level since October 2014 and its biggest monthly drop since 2010.
Check out: MarketWatch’s Economic Calendar
A flurry of European economic reports also were hitting Wednesday, with France revising its 2017 GDP growth higher, to 2%. In addition, a February figure for French inflation disappointed, as did a January number for consumer spending in the eurozone’s second-biggest economy.