The U.S. dollar recorded slight gains on Wednesday after Federal Reserve Chair Jerome Powell struck a cautious tone on further monetary easing, while the euro failed to capitalize on positive headlines regarding Ukraine.
The dollar index, which measures the greenback’s performance against a basket of six major currencies, rose 0.2% to 97.080, recovering from earlier losses.
Powell reiterated his cautious stance on easing monetary policy during a speech at the Rhode Island Chamber of Commerce, noting that the central bank faces a “complex situation” as inflation risks remain tilted to the upside while slowing job growth raises concerns over the health of the labor market.
He did not provide a clear signal on the timing of the next rate cut, warning that moving too quickly could spark a fresh wave of inflation, while delaying action might unnecessarily push unemployment higher.
The Fed had already lowered interest rates earlier this month by 25 basis points for the first time this year, and markets are currently pricing in similar cuts at each of the two remaining policy meetings. Economic analyses suggested that Powell continues to adopt a more hawkish stance compared with the overall Federal Open Market Committee consensus, as reflected in the committee’s median dot plot projections.
Although some housing data is expected later this week, it is unlikely to have a major impact on market sentiment for now, given the lack of strong drivers from either economic releases or Fed officials’ remarks.
Some analysts expressed caution toward the dollar this week, noting that thin trading activity and limited official commentary could keep the greenback hovering near its current levels against most G10 currencies.
Meanwhile, the euro slipped 0.2% to 1.1794 against the dollar, despite positive remarks from the U.S. President regarding Ukraine’s position in the war with Russia. He stated, following a meeting with Ukrainian President Volodymyr Zelensky at the U.N. General Assembly, that he believed Ukraine could reclaim all the territory Russia has occupied since the start of the invasion. This marked a notable shift in tone, especially as he had previously suggested that both sides might need to cede territory to end the conflict.
Despite the change in rhetoric, markets showed little reaction, given the lack of tangible progress in peace talks so far. Analysts also pointed to additional downside risks for the euro, particularly for higher-beta European currencies, amid warnings of potential escalation should NATO airspace face Russian incursions.
The British pound also fell 0.3% to 1.3487, moving back toward the two-week low it reached last week.
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