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Dollar Dented by Soaring Sterling, Dovish Powell Remarks

2/27/2019, 2:58:13 PMTrading Strategies
Dollar Dented by Soaring Sterling, Dovish Powell Remarks

The U.S. dollar traded lower against a basket of major currencies Tuesday after Federal Reserve Chairman Jerome Powell said the central bank would remain patient on interest-rate hikes.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.22% to 96.06.

Powell delivered an upbeat assessment of the economy, though he did acknowledge there were some headwinds. He also said the central bank was prepared to adjust its runoff of the balance sheet policy as necessary.

The dollar was also pressured by a surge in the pound to 21-month highs on rising expectations the U.K. will delay Brexit and request the EU extend the March 29 deadline, when Britain is expected to leave the bloc.

GBP/USD rose 1.34% to $1.3270.

The prospect of Brexit getting overturned also boosted sentiment after the leader of the main opposition party to the U.K. government, Jeremy Corbyn, said he would back a second referendum on Brexit.

Mizuho International, however, downplayed the prospect of a second referendum, writing in a note Tuesday: "The chance of a second referendum still looks very slim, marginally higher than previously, because the backing from Labour has many conditions and comes from a party which has weakened both in the opinion polls and in the House of Commons."

Better-than-expected U.S. consumer confidence data, meanwhile, pointed to ongoing consumer strength, which plays a major in overall economic activity. That limits downside momentum in the greenback.

The Conference Board’s consumer confidence gauge rose to 131.4 in February, from 121.7 last month, beating economists’ forecast for a reading of 124.7.

EUR/USD rose 0.19% to $1.1380. Sentiment on the single currency has improved after ratings agency Fitch decided last week not to downgraded Italy's debt below "investment grade."

USD/JPY fell 0.33% to Y110.70, while USD/CAD gained 0.01% to C$1.3190.