SINGAPORE- The US dollar made a tentative start to the week on Monday as investors awaited testimony from Federal Reserve Chair Jerome Powell and looked towards for a February jobs report that will likely influence how hawkish the US central bank will be.
The dollar index, which measures the US currency against six major peers, was down 0.057 percent at 104.560, but not far off a seven-week high of 105.36 it touched last week. The index last week clocked a weekly loss for the first time since January.
After delivering jumbo hikes last year, the Fed has raised interest rates by 25 basis points in its latest two meetings, but a slew of resilient economic data has stoked market fears that the central bank might return to its aggressive path.
Futures imply a 72 percent chance the Fed will raise interest rates by 25 basis points at its meeting on March 22.
The spotlight will be firmly on the February jobs report scheduled for Friday and Fed Chair Jerome Powell’s testimony to congress on Tuesday and Wednesday.
“US underlying inflation remains stubbornly high well above the Fed’s inflation target of 2 percent,” said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia.
Recent data suggest that consumer spending is not slowing much, while the labor market is unsustainably tight, Capurso said in a note, adding that Powell would likely be hawkish in his testimony.
Citi strategists expect Powell to indicate a preference for a 25 bps hike but leave all options on the table, since he will speak before the jobs data are released.
Citi expects an increase in payrolls of 255,000 following January’s enormous 517,000 jump.
A large surprise on the upside could lead to a 50 bps hike from the Fed, Citi said.
Meanwhile, the euro was down 0.02 percent to $1.0632, having gained 0.8 percent last week.
The Japanese yen strengthened 0.01 percent to 135.85 per dollar, while sterling was last trading at $1.203, down 0.08 percent on the day. – Reuters
