FX.co ★ Dollar Rises as Powell Signals Caution

The dollar index experienced a rebound surpassing 97.3 on Wednesday, thereby halting its two-day decline. This rise came after Federal Reserve Chair Jerome Powell expressed a cautious perspective on future policy easing. Powell highlighted that the trajectory for interest rate cuts remains uncertain as the central bank works to balance the goal of controlling inflation against the challenges of a weakening labor market. He also mentioned that tariff-induced price pressures have been milder than anticipated, offering potential flexibility for a less restrictive policy if needed. Concurrently, newly appointed Fed Governor Stephen Miran, who advocated for a more substantial 50 basis point cut in last week’s session, cautioned that the Fed might be underestimating the severity of policy tightness, thus risking employment without more decisive measures. Investors are now focusing on the forthcoming PCE price index, the Fed’s preferred gauge for inflation, for further insights.