The dollar index (DXY00) Wednesday recovered from early losses and rose by +0.09%. The dollar moved higher Wednesday afternoon due to hawkish comments from Fed Chair Powell, who said, “We expect a meaningful amount of inflation in the coming months.” Mr. Powell’s comments signal the Fed is not close to cutting interest rates and is supportive of the dollar. Also, heightened geopolitical risks in the Middle East support safe-haven demand for the dollar.
The dollar on Wednesday initially moved lower on the weaker-than-expected reports on US May housing starts and building permits. Also, the action by the FOMC to cut its US 2025 GDP forecast was bearish for the dollar. In addition, the FOMC’s dot-plot that projects two 25 bp interest rate cuts by the end of the year is negative for the dollar.
