The U.S. dollar gained ground Wednesday following cautious remarks from Federal Reserve Chair Jerome Powell regarding further monetary easing, while the euro struggled to benefit from positive news on Ukraine.
At 03:50 ET (07:50 GMT), the Dollar Index, which tracks the greenback against six major currencies, rose 0.2% to 97.080, recovering slightly after earlier declines.
Powell signals caution
In a speech to Rhode Island’s Greater Providence Chamber of Commerce on Tuesday, Powell emphasized the Federal Reserve’s “challenging situation,” noting the dual risks of faster-than-expected inflation and weak job growth raising concerns about labor market health.
He offered little clarity on the timing of future interest rate cuts, warning that moving too quickly could reignite inflation, while easing too slowly might unnecessarily push unemployment higher. The Fed reduced rates earlier this month for the first time in 2025, and markets currently anticipate quarter-point cuts at the remaining two Fed meetings this year.
“Fed Chair Jerome Powell broadly reiterated his cautious view yesterday, signalling there is some balance between downside employment risks and upside inflation risks. The result is still a more hawkish tone by the chair relative to the FOMC consensus, as expressed by the median Dot Plot,” analysts at ING noted.
Later in the session, housing data may provide additional insight, though it is unlikely to shift sentiment significantly. “We retain a moderate bearish bias on the dollar this week, although a quiet day for data and Fedspeak today (only Mary Daly is due to speak) means we could see FX volatility ease further and the dollar hover close to the current level in most G10 crosses,” ING added.
Euro reacts cautiously to Trump comments
In Europe, the euro slipped 0.2% against the dollar to 1.1794, failing to gain despite upbeat remarks from U.S. President Donald Trump on Ukraine. Trump said via his Truth Social platform that he believes Ukraine can reclaim all territory lost to Russia since the invasion, after meeting Ukrainian President Volodymyr Zelenskiy on the sidelines of the U.N. General Assembly.
He had previously indicated that both Kyiv and Moscow might need to cede land to end the conflict. “With time, patience, and the financial support of Europe and, in particular, NATO, the original Borders from where this War started, is very much an option,” Trump wrote in his post.
“While that is a significant change of tone, markets have been treating Trump’s comments on the matter with caution due to a lack of progress in peace negotiations so far,” said ING. “If anything, there are downside risks for the euro and even more for higher-beta European currencies as Trump told EU allies to shoot down Russian planes violating NATO airspace.”
GBP/USD moved 0.3% lower to 1.3487, returning toward last week’s two-week low.
Other currency movements
Elsewhere, USD/JPY increased 0.3% to 148.10. The Bank of Japan kept policy unchanged last week, but hawkish signals have sparked speculation about earlier rate hikes. USD/CNY gained 0.1% to 7.1193, while AUD/USD rose 0.4% to 0.6620 following Australia’s CPI report for August, which showed a 3.0% year-over-year increase, slightly above forecasts of 2.9%.
The Reserve Bank of Australia had cut rates in its previous meeting and indicated the potential for further reductions if economic data supported it. However, Wednesday’s CPI print, reaching the top of the RBA’s target range, reignited concerns about the bank’s next moves.
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