Dollar Takes a Dive as Fed Rate Hike Diminish

The U.S. dollar has hit an eight-week low against the euro due to growing confidence that the Federal Reserve will halt interest rate hikes. This week, various remarks from U.S. central bank officials will be scrutinized for additional insights into rate policy.

Observers will examine Fed Chairman Jerome Powell’s speeches on Wednesday and Thursday for any signs of the softer stance he adopted after last week’s Fed meeting. They will also study comments from other Fed officials to assess the potential for more rate hikes. Despite the unanimous statement last week, there is speculation of a divergence between the doves and hawks on the Federal Open Market Committee. Weaker than expected jobs growth in October and a slowing U.S. economy have added to expectations of the Fed holding rates steady.

The next market driver will likely be next week’s consumer price inflation data for October. The data will determine whether the focus shifts toward the extent of anticipated monetary easing for next year or toward potential dip buying in the dollar against several other currencies.

The dollar index was slightly down, and the euro gained a bit, reaching its highest since mid-September. However, economic weakness in the eurozone relative to the U.S. may limit further gains in the single currency against the greenback.

The downturn in euro zone business activity accelerated last month, increasing the likelihood of a recession in the 20-country currency union. The dollar rose against the Japanese yen, and sterling also gained a bit. Britain’s GDP data for the third quarter is due this week.