Investing.com — The dollar was higher against the British pound and emerging market currencies in early trading in Europe Wednesday, but range-bound against most of its peers as the market braced for Federal Reserve Chairman Jerome Powell’s two days of testimony before Congress.
Powell is due to start his at 10:00 AM ET (14:00 GMT), against a backdrop of elevated uncertainty over the path of interest rates for the rest of the year. The market has scaled back its expectations for an immediate, high-impact easing of policy in the wake of Friday’s stronger-than-expected U.S. labor market report, but still expects a 25 basis point cut in the Fed funds rate when the Federal Open Markets Committee meets at the end of July.
The dollar has firmed since Friday, but many analysts believe that it has passed its cyclical peak, given that the next move appears more likely to be down than up. Analysts at ING point out that the cost of buying protection against a euro slide has fallen sharply in recent weeks, while the cost of buying protection against a euro appreciation has risen somewhat.
Even so, ING strategist Chris Turner said last week “it still looks far too early to call for to move higher” given the likelihood of the European Central Bank easing, and the threats to the Eurozone economy from potential U.S. import tariffs, Brexit and Italy’s budget problems.
As of 3:45 AM ET (7:45 GMT), the euro was at $1.1216, up 0.1% from late Tuesday. The , which tracks the greenback against a basket of developed-market peers, was unchanged at 97.08.
The focus in Europe on Wednesday will again be on sterling. The hit a new two-year low against the dollar in early trading ahead of a monthly report on for May. Although a slight expansion is expected in May, expectations are increasing that the U.K. economy will register its first quarterly contraction since 2012 in the second quarter.
The also hit a six-month low against the euro, despite increasing signs that the European Central Bank will announce some form of monetary policy easing at its next governing council meeting in late July.
By 3:45 AM ET (7:45 GMT), the pound was at $1.2458, up from an earlier intra-day low of $1.2444, while it was at 1.1106 euros, having earlier dipped below 1.1100 for the first time since December.