The euro fell 0.2% against the dollar to 1.1794, as markets reacted cautiously to comments from former U.S. President Donald Trump regarding Ukraine. While Trump stated that Kyiv could regain all the territory Russia has occupied since the start of the war, investors viewed the lack of tangible progress in negotiations as diminishing the significance of his remarks. Analysts also pointed out that risks remain for the European currency, particularly after Trump urged EU allies to take tougher stances against potential Russian violations of NATO airspace.
The British pound declined about 0.3% to 1.3487, nearing a two-week low, while the dollar rose against the Japanese yen to 148.10 after the Bank of Japan kept its policy unchanged, fueling speculation of a possible rate hike sooner than expected.
The U.S. dollar posted modest gains on Wednesday, supported by cautious remarks from Federal Reserve Chair Jerome Powell, while the euro failed to benefit from the positive sentiment surrounding the Ukraine issue. The dollar index, which tracks the U.S. currency against a basket of six major peers, rose about 0.2% to 97.08, recovering part of its earlier losses.
In his speech to the Greater Providence Chamber of Commerce, Powell emphasized the difficult balance the central bank faces, with inflation still posing a risk of rising faster than expected, while weakening labor market conditions raise concerns about growth. He warned that cutting rates too quickly could reignite inflationary pressures, whereas moving too slowly could unnecessarily push unemployment higher.
It is worth noting that the Fed cut interest rates earlier this month by 25 basis points for the first time this year, and markets are pricing in similar moves at the next two meetings. Powell’s latest tone reflected a stronger emphasis on balancing inflation risks against labor market weakness, a stance ING analysts described as more hawkish compared with the overall Federal Open Market Committee consensus.
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