Dollar subdued as traders eye Powell testimony, jobs report

The U.S. 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 U.S.

Illustration shows U.S. Dollar banknotes — Woman holds U.S. dollar banknotes in this illustration taken May 30, 2022. Reuters

The U.S. 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 U.S. central bank will be.

The dollar index, which measures the U.S. currency against six major peers, was down 0.057% 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% 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.

"U.S. underlying inflation remains stubbornly high well above the Fed's inflation target of 2%," 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 labour 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% to $1.0632, having gained 0.8% last week.

The Japanese yen strengthened 0.01% to 135.85 per dollar, while sterling was last trading at $1.203, down 0.08% on the day.

In the spot market, the onshore yuan opened at 6.9072 per dollar and was last changing hands at 6.9067. On Sunday, China set a modest target for 2023 economic growth of around 5% as it kicked off the annual session of its National People's Congress.

In cryptocurrencies, bitcoin rose 0.95% to $22,455.94, having fallen 5% on Friday. Ethereum was up 0.51% at $1,567.30.

The Australian dollar fell 0.19% to $0.676, while the kiwi eased 0.10% to $0.622.

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Currency bid prices at 0128 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.0627 $1.0634 -0.06% -0.82% +1.0637 +1.0615

Dollar/Yen 135.7550 135.8000 +0.00% +3.48% +135.9300 +0.0000

Euro/Yen 144.29 144.46 -0.12% +2.84% +144.6000 +144.1600

Dollar/Swiss 0.9370 0.9361 +0.11% +1.34% +0.9372 +0.9364

Sterling/Dollar 1.2028 1.2043 -0.14% -0.56% +1.2040 +1.2024