Dollar stalls ahead of Fed meeting

The dollar lacked direction on Tuesday as traders held off on making big moves ahead of the Federal Reserve meeting concluding Wednesday, at which policymakers are expected to cut interest rates for the first time since the financial crisis by 25 basis points.

The move would be a so-called insurance cut to protect the U.S. economy from global uncertainties and trade pressures, in contrast to interest rate cuts by countries facing more imminent risks. Markets will be watching the Fed’s forward guidance for clarity on whether the committee sees the cut as a one-off or as the beginning of a rate-cutting cycle.

“The market is on hold waiting for the FOMC meeting tomorrow. That is expected to be the next driver of price action at a general level,” said Shahab Jalinoos, global head of foreign exchange strategy at Credit Suisse in New York.

The euro hovered on Tuesday around the 26-month low it reached last week of $1.110. Although the Fed is expected to lower rates, U.S. yields will remain above those in the euro zone, making the dollar a more attractive investment for yield-seeking traders.

The pound was the biggest mover in the foreign exchange market, plunging to a new 28-month low of $1.212 in Asian trading on growing concerns that Britain could crash out of the European Union without a transition agreement on Oct. 31.

Sterling was last down 0.33% at $1.217. It was also weaker against the euro by 0.37% at 91.54 pence, having earlier touched a two-year low of 91.88 pence.

“Clearly in the UK, sterling is moving due to local political developments – most importantly the idea that Prime Minister Johnson may not want to meet European leaders unless they change their position, which is a more hard-line stance than the market would have expected as recently as a week ago,” said Jalinoos.

The Japanese yen was last up by 0.21% at 108.54 yen per dollar after the Bank of Japan on Tuesday maintained its pledge to keep short-term interest rates at a negative 0.1% via aggressive bond purchases, as expected.

“The Bank of Japan meeting did not deliver anything materially new. There was a minor change in the wording of the statement, but it does appear that Japan is going to wait and see what materializes from the Fed and ECB before taking action,” said Jalinoos.

Sterling tumble continues on growing worries about no-deal Brexit

Sterling fell to a new two-year low versus the dollar on Tuesday amid growing speculation that Britain is headed for a messy no-deal Brexit from the European Union.

Sterling has fallen against the dollar for the past four trading days on worries that Britain will exit the EU without agreements on trade and other key issues. There is also a chance that new Prime Minister Johnson will call an early election.

Against a basket of six major currencies, the dollar traded near a two-month high.

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The Fed is expected to cut rates by 25 basis points on Wednesday, and investors are watching for clues on whether the move may be a one-off or the first in a series of several cuts, as many traders are anticipating.

Uncertainty about how Britain will divorce itself from the EU and the resulting economic impact could keep the pound on the back foot for weeks to come.

Monetary policy is another important factor for currency markets as central banks from Australia, New Zealand, Europe and possibly Britain are expected to cut rates due to low inflation and risks to global economic growth.

“No one wants to buy the pound now,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo.

“The bottom has fallen out, and I’m not sure where it will stop. Uncertainty about Brexit is the main story. I don’t see how Johnson can get an agreement in place.”

Sterling fell to $1.2120, the lowest since March 2017.

The pound took a turn for the worse on Monday after Johnson said the Brexit divorce was dead and warned that unless the European Union renegotiated, Britain would leave on Oct. 31 without a deal.

The dollar index edged to a two-month high of 98.206.

The Fed is forecast to cut its target interest rate range on Wednesday by 25 basis points to 2.00%-2.25%.

Investors previously saw the chance of an even more aggressive 50-basis point cut, according to interest rate swaps, but these expectations have dissipated as data has shown the U.S. economy is not as weak as some feared.

The yen was little changed versus the dollar on Tuesday, trading near a three-week low after the Bank of Japan left monetary policy on hold as expected.

The yen was quoted at 108.570 per dollar, little changed on the day. The yen fell to a three-week low of 108.950 early in Asian trading.

Japan’s currency pared its losses and edged a tad higher versus the dollar after the BOJ’s decision, but the move quickly faded.

The BOJ, as expected, maintained a pledge to guide short-term interest rates at -0.1% and the 10-year bond yield around 0% via aggressive bond purchases.

The BOJ also said it will ramp up stimulus “without hesitation” if needed, but traders have repeatedly said that compared with other major central banks the BOJ has limited options left.

Dollar near two-month top after US GDP boosts yield appeal

The dollar clung to a two-month high against a basket of currencies in Asia on Monday after better-than-expected U.S. GDP data last week enhanced its yield attraction against rival currencies.

The U.S. Federal Reserve is widely expected to cut interest rates for the first time in more than a decade this week, but such a move is widely seen as a pre-emptive one to protect the economy from global uncertainties and trade pressures, in contrast to some other countries that face more imminent risks.

“What everyone is interested in right now is whether the U.S. will enter a full rate-cut cycle. The GDP figures were a bit stronger than expected, putting a dent to the view of the U.S. entering a long easing cycle,” said Kyosuke Suzuki, director of forex at Societe Generale.

The dollar index stood little changed at 97.980, after having hit a two-month high of 98.093 on Friday.

U.S. gross domestic product increased at a 2.1% annualized rate in the second quarter, above forecast of 1.8%, as a surge in consumer spending blunted some of the drag from declining exports and a smaller inventory build.

“Recently the dollar has been supported by strong U.S. economic data. The euro zone data has been weak of late so if coming U.S. data such as payrolls figures are strong, the dollar could gain despite a Fed rate cut,” said Shinichiro Kadota, senior strategist at Barclays.

The data pushed up U.S. bond yields and cemented expectations that the Fed will go for a smaller interest rate cut of 25 basis points, rather than 50 basis points, to 2.0-2.25 percent.

While U.S. money market futures price in a total of almost 75 basis points of cuts by the end of the year to 1.5-1.75 percent, that still leaves the dollar with the highest interest rates among major currencies.

The European Central Bank signaled last week that it is likely to cut interest rates deeper into negative and adopt more easing measures in September to shore up the sagging euro zone economy.

The euro stood at $1.113, almost flat in Asia and not far from Thursday’s low of $1.1101, a trough since May 2017.

The U.S. currency also got a minor boost from White House economic adviser Larry Kudlow, who said on Friday that the Trump administration has “ruled out” intervening in markets to lower the U.S. dollar’s value.

Against the yen, the dollar slipped 0.12% to 108.53 yen due largely to month-end selling by Japanese exporters, after having hit a two-week peak of 108.83 yen on Friday.

The Bank of Japan is starting a two-day policy meeting later on Monday.

Market players expect the BOJ to send dovish messages and it could try to put on a semblance of easing by changing its forward guidance.

But the central bank looks certain to refrain from rate cuts and other major policy easing given its lack of policy ammunition.

The Australian dollar was slightly lower at $0.6903 after dipping to one-month low of $0.6900 earlier following Chinese data on Saturday showing profits earned by the country’s industrial firms contracted in June.

U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer will meet with Chinese Vice Premier Liu He for talks in Shanghai starting on Tuesday, their first face-to-face meeting since U.S. President Donald Trump and Chinese President Xi Jinping agreed to revive talks late last month.

But Trump on Friday offered a pessimistic view of reaching a trade deal with China, saying Beijing may not sign one before the November 2020 election in hopes a Democrat who will be easier to deal with, will win.

Sterling fell to a 28-month low as a no-deal Brexit seems increasingly likely under new British Prime Minister Boris Johnson.

Senior ministers said on Sunday the British government is working on the assumption that the European Union will not renegotiate its Brexit deal and is ramping up preparations to leave the bloc on Oct. 31 without an agreement.

An opinion poll also showed Johnson’s Conservative Party has opened up a 10-point lead over the opposition Labour Party, fuelling speculation that Johnson will call an early election.

Euro at 2-month low against dollar as investors wait for ECB easing

The euro sank to a new two-month low against the dollar on Thursday as investors waited for the European Central Bank to signal another round of monetary easing, including a possible rate cut and the resumption of bond purchases.

The slide was exacerbated by a bigger-than-expected fall in the German Ifo index of current business conditions to 99.4 in July from 100.8 in June. A Reuters poll of economists had expected a decline to 100.4.

“I doubt that anything the ECB does or says provides much comfort” for the beleaguered euro, said Kit Juckes, macro strategist at Societe Generale.

Money markets are pricing in a 50% chance of a 10 basis points interest rate cut by the ECB on Thursday, a smaller probability than last week, but some expect that President Mario Draghi will open the door for further cuts down the road or for more quantitative easing.

Hedge funds kept short positions on the euro at $4.39 billion in the week to July 16, around levels seen early this year, according to the Commodity Futures Trading Commission.

However, some analysts expect the central bank to be way less dovish and only tweak its forward guidance by re-introducing the easing bias.

“Our best guess is euro ends the day higher,” said Elsa Lignos, strategist at RBC Capital Markets, adding that RBC analysts expect the ECB to wait until September to cut the key benchmark rate.

A Deutsche Bank index showed investors have been ramping up call options holdings in euro/dollar, pushing the amount of call options to the highest since early 2018, which serves as evidence that some market participants see the euro strengthening.

“This is an ECB meeting where the market seems unprepared for EUR/USD weakness,” said George Saravelos, a forex strategist at the German lender.

Those opposing views in the market were reflected in euro overnight implied volatility jumping to 12.73, its highest since December.

The euro dropped earlier to $1.1122, the lowest it’s been since May 30, trading down 0.1% on the day at $1.1128. It has shed more than 2% of its value so far this month. The ECB announces its rate decision at 1145 GMT, followed by a news conference at 1230 GMT.

The Swiss franc, buoyed by expectations of lower rates in the euro zone, rocketed to a new two-year high of 1.0963 against the common currency and was last at 1.0978. The spike in the franc bolstered expectations that the Swiss could intervene to weaken the currency to protect their export-reliant economy.

Sebastien Galy, macro strategist at Nordea Asset Management, said he expected the Swiss National Bank and Danish central banks to cut rates in September and he saw “a decent chance that the SNB already reacts post today’s ECB meeting.”

Elsewhere, expectations of lower interest rates sent the Australian dollar to a new two-week low of $0.6963.

The pound remained below $1.25 and not far from the 27-month low it reached last week, last trading slightly lower at $1.2472 as new Prime Minister Boris Johnson assembled his largely Brexiteer cabinet.

Euro slips to two-month low ahead of ECB meeting, pound under pressure

The euro slipped to a two-month low on Wednesday, as markets waited to gauge the European Central Bank’s stance on policy amid bubbling expectations that it could eventually lower interest rates and join the global easing trend.

The common currency was 0.05% lower at $1.1145 after touching $1.1143, its lowest since May 31. It had already lost more than 0.5% the previous day and shed nearly 0.7% so far this week.

The euro’s decline has quickened ahead of the ECB’s policy meeting on Thursday. While markets have pared their bets the central bank would cut rates by 10 basis points, they still expect dovish guidance, paving the way for easing in September.

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“Attempts within the currency market to price in dovish moves or language by the ECB have gathered pace over the last few days, leading to the euro’s steep decline,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

“The key point is not necessarily whether the ECB eases this week or not, but what kind of language (President Mario) Draghi employs regarding policy direction.”

The euro was also seen weighed down as the pound slumped toward a two-year low after Boris Johnson on Tuesday won the contest to be the next British prime minister and raised the specter of a no-deal Brexit.

Sterling was a touch lower at $1.2433, on track for its fourth straight day of losses and edging closer to $1.2382, the two-year trough brushed last week.

The dollar hovered near a one-week high of 108.290 yen scaled overnight, supported by a rise in U.S. Treasury yields as investor risk aversion waned following some progress in U.S.-China trade negotiations.

U.S. Trade Representative Robert Lighthizer and senior U.S. officials will travel to Shanghai on Monday for face-to-face trade meetings with Chinese officials, Bloomberg reported on Tuesday, citing unnamed sources.

The greenback also firmed after Washington on Tuesday reached a deal to lift government borrowing limits. Analysts reckon increased U.S. borrowing would tighten the supply of money in the country’s banking system and in turn support the dollar.

The dollar index edged up to a five-week high of 97.755, following gains of nearly 0.5% the previous day.

“In addition to the euro’s weakness ahead of the ECB meeting, the dollar is supported as market participants continue to discount the likelihood of the Fed cutting rates by 50 basis points at next week’s FOMC (Federal Open Market Committee) meeting,” said Ayako Sera, senior market economist at Sumitomo Mitsui Trust.

Speculation that the Federal Reserve would lower rates by 50 bps at its July 30-31 meeting had increased earlier this month following comments from some senior Fed officials, but investors now see a shallower 25 bp cut as more likely.

The Australian dollar fell to a 12-day low of $0.6978 after Westpac Banking Corp brought forward the timing of its forecast for the next rate cut by the Reserve Bank of Australia (RBA) to October, from November previously. The Aussie last traded down 0.35% at $0.6980.

Sterling in defensive mood on concerns about no-deal Brexit

Sterling was on the back foot on Tuesday as investors worried Boris Johnson, the front-runner to become the UK’s next prime minister, would trigger a “hard Brexit” from the European Union, widely seen as a major risk for the British economy.

The euro briefly touched the lowest in five weeks due to growing expectations European Central Bank President Mario Draghi will signal a rate cut in September at a policy meeting later this week to keep inflation expectations on track.

The New Zealand dollar fell after Bloomberg News reported that the country’s central bank is refreshing its strategies for unconventional monetary policy, but trading in other Asian currencies was subdued as investors awaited major developments in China-U.S. trade negotiations.

The dollar edged higher against the yen but was hemmed in against other major currencies on expectations for a U.S. Federal Reserve rate cut next week.

Speculation over the likelihood of a no-deal Brexit and questions over how far major central banks will ease monetary policy are likely to set the tone for currency markets in coming weeks, traders and analysts said.

“Johnson is expected to become the new prime minister, so there is a real chance of a hard Brexit,” said Takuya Kanda, general manager of research at Gaitame.Com Research Institute in Tokyo.

“In the short term, further declines in the pound could be limited because positions are already very short. In the medium term, sentiment for sterling will remain soft.”

The pound traded at $1.2459, within striking distance of a 27-month low of $1.2382 reached last week.

Sterling has fallen 3.7% versus the dollar in the past three months due to uncertainty about how Britain will avoid a no-deal exit from the EU.

Britain’s Conservative Party will announce the results of a leadership election on Tuesday, with Johnson widely expected to win, setting him up to become prime minister on Wednesday.

There is growing speculation Johnson will pull Britain out of the EU on Oct. 31 without a trade deal in place.

Hedge funds have increased short positions on the pound to a 10-month high in the week to July 16, Commodity Futures Trading Commission data shows.

The New Zealand dollar fell 0.4% to $0.6734, putting the kiwi on track for a third straight day of losses.

The Reserve Bank of New Zealand has “begun scoping a project to refresh our unconventional monetary policy strategy and implementation,” the central bank said according to a Bloomberg News article published on Tuesday.

The RBNZ kept the official cash rate at a record low of 1.50% in June but warned that interest rate cuts may be necessary in the future.

Interest rate swaps showed a 79% chance of a 25 basis point rate cut at the RBNZ’s next policy meeting on Aug. 7.

“The Bloomberg story has struck a nerve because it can be linked to speculation about a rate cut at the next policy meeting,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo.

“It’s possible for the kiwi to go a little lower. The currency market is focused completely on central bank policy moves.”

The euro briefly fell to $1.1191, the lowest since June 19, as traders awaited the ECB’s policy meeting and Draghi’s comments at a news conference on Thursday.

Traders see a 43% probability that European policymakers will lower a key deposit rate by 10 basis points to minus 0.50% to combat risk from global trade tensions.

Economists surveyed by Reuters expect the ECB to change its forward guidance to pave the way for a rate cut in September.

The dollar traded at 108.14 yen. The dollar index was marginally higher at 97.435.

The U.S. central bank is widely expected to lower its target range of 2.25%-2.50% by 25 basis points at a meeting ending July 31, but expectations for a larger 50-basis point cut have waxed and waned due to mixed signals from Fed policymakers.

Dollar on back foot after Fed shores up bets on large rate cut

The dollar steadied on Friday but was still on the defensive after Federal Reserve officials bolstered expectations of an aggressive rate cut this month to address weakening price pressures.

At a central banking conference on Thursday, New York Fed President John Williams argued for pre-emptive measures to avoid having to deal with too low inflation and interest rates.

That sent the dollar down before it bounced slightly in early Asian trade, after a New York Fed representative subsequently said Williams’ comments were academic and not about immediate policy direction.

Still, investors took his remarks along with separate comments from Fed Vice Chair Richard Clarida as another dovish signal from the central bank, which could be opening the way for a big rate cut at the end of this month.

The dollar stood at 107.42 yen, up 0.2% from late U.S. levels after having hit a three-week low of 107.21 the previous day.

The euro eased slightly to $1.1266 from $1.1282. On the week, the dollar is down 0.4% versus the yen and 0.1% on the euro.

The dollar index, which hit a two-week low of 96.648, bounced to 96.792.

The greenback fell broadly on Thursday after Williams’ remarks bolstered bets that the Fed would cut interest rates by 50 basis points, rather than 25 basis points.

Williams said when rates and inflation are low, policymakers cannot afford to keep their “powder dry” and wait for potential economic problems to materialize.

That is especially true with neutral rates that would neither restrict nor accelerate the U.S. economy, he said. When adjusted for inflation, the neutral rate is near the Fed’s current policy rate, which is in a range of 2.25-2.50%.

Financial markets reacted quickly, with money market futures pricing in almost a 70% chance of a 50 basis point cut at its policy meeting on July 30-31 at one point.

The odds eased to around 40% after the New York Fed’s clarification of his speech.

All the same, Williams’ rate-cut view was echoed by Fed Vice Chair Clarida, who told Fox Business Network the central bank might have to act early and not wait “until things get so bad”.

“Williams’ comments were surprisingly dovish. The NY Fed went all the way to try to modify the message but no one seems to have done so for Clarida, who also said a very similar thing,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

The dollar’s weakness also underpinned many emerging market currencies.

MSCI’s emerging market currency index has risen 0.35% so far this week to a four-month high of 1,657.07, coming within sight of this year’s double peak around 1,658, hit in late January and March.

The Brazilian real rose to five-month high of 3.7172 to the dollar on Thursday while the South African rand also scaled a five-month peak of 13.8175 and last stood at 13.855.

“If the Fed cut rates, that could encourage fresh investments in emerging currencies and other risk assets,” said Bart Wakabayashi, State Street Bank’s representative in Japan.

Elsewhere, the pound remained firm following stronger-than-expected UK retail sales numbers and after British lawmakers on Thursday approved proposals to make it harder for the next prime minister to force through a no-deal Brexit by suspending parliament.

The pound stood at $1.2552, flat in Asia after 0.93% gains overnight, though it was the worst performer among G10 currencies so far this week, with a loss of 0.2%.

The biggest stride was made by the New Zealand dollar, which is up 1.3% for the week at a 3-1/2-month high of $0.6785, as the Fed’s anticipated monetary easing is seen boosting the relative yield attraction of the kiwi.

The currency has the second highest bond yield among G10 currencies after the U.S. dollar.

Sterling down on Brexit concerns, weighs on euro

The pound struggled near a six-month low against the dollar on Tuesday, hampered by persistent worries over Brexit that, in turn, weighed on the euro.

The dollar fought for traction against the yen as the prospect of a Federal Reserve interest rate cut later in the month continued to keep the greenback on the defensive.

The pound was a shade lower at $1.2515 following an overnight loss of 0.5%. A slip below $1.2439 would take sterling to its lowest since early January.

The euro was little changed at $1.1260 after shedding 0.1% the previous day, constrained by expectations for a dovish European Central Bank meeting next week.

Sterling was under pressure as investors were nervous about the prospect of eurosceptic Boris Johnson winning the Conservative party leadership contest and becoming the next British prime minister as early as the end of this month.

Poor economic data and signals from the Bank of England that it could cut interest rates instead of raising them as previously expected have also hit the pound.

“The euro has been weighed by the long struggling pound, which in turn is likely to suffer from Brexit-related woes until the Conservative party leader is decided next week,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

The dollar was little changed at 107.960 yen.

The U.S. currency rose to a six-week high of 108.990 yen last week but slid after Federal Reserve Chairman Jerome Powell set the stage for a rate cut later this month by highlighting uncertainties facing the world’s largest economy.

The dollar lost further ground against the yen towards the end of last week after Chicago Fed President Charles Evans said on Friday that “a couple” of rate cuts were needed to boost inflation.

“Dollar/yen has strengthened its correlation with U.S. yields since mid-May, rather than move in step with equity prices,” said Daisuke Karakama, chief market economist at Mizuho Bank.

“Prior expectations that higher equities would weaken the yen held by some market participants have been dashed completely.”

The prospect of the Fed easing monetary policy has been a boon to equities, with Wall Street shares advancing to record highs over the past week.

The yen, a perceived safe haven, has often depreciated when stronger investor risk appetite has boosted equities. But the correlation has weakened in the face of falling U.S. yields, which has seen the 10-year yield decline to near three-year lows this month amid looming easing by the Fed.

The dollar index versus a basket of six major currencies was nearly flat at 96.924 after edging up 0.13% the previous day.

The Australian dollar was almost unchanged at $0.7037 after gaining about 0.3% the previous day, getting a lift from Chinese economic data which either matched or beat market forecasts.

The Aussie is sensitive to the economic fortunes of China, Australia’s largest trading partner.

Australian dollar strengthens on encouraging Chinese data

The Australian dollar strengthened on stronger-than-expected economic data from China, which some analysts saw as signalling that moves aimed at reviving spending in the world’s second biggest economy are having some success.

The Aussie gained against the U.S. dollar, which advanced against the safe-haven yen and the Swiss franc.

China’s industrial output bounced in June from a 17-year low in the previous month. June retail sales surged 9.8% from a year earlier, compared with the 8.3% – a slowing from May’s tepid figures – that polled analysts expected.

The Australian dollar rose almost 0.2% to $0.7024 after China’s data release. The yuan strengthened against the dollar to touch its highest since last week.

“China’s economy is finding a base and it was not as weak as feared, so risky currencies go up,” said Imre Speizer head of NZ strategy at Westpac Banking Corporation in Auckland.

“The market is wanting to price a lot of risk into the Aussie,” he said.

China’s quarterly gross domestic product posted its slowest pace of growth in 27 years, as expected, growing by 6.2% in the June quarter compared to a year earlier.

Ray Attrill, head of forex strategy at National Australia Bank in Sydney, said Monday’s figures, on the back of credit data on Friday, showed China’s stimulus program is gaining traction.

“There are signs it is starting to work,” he said.

“Whether you’re building a railway between two cities in China or whether you’re building stuff to sell to the U.S. it seems to need a lot of steel… it is still a good news story for Australia – that’s certainly the way that the market has chosen to interpret the numbers.”

The data also lifted the China-exposed New Zealand dollar by 0.18% to $0.6721.

The U.S. dollar, meanwhile, remains under pressure on expectations of a Federal Reserve rate cut. Comments last week from Fed Chair Jerome Powell and Chicago Fed president Charles Evans indicated U.S. rate cuts are needed to boost inflation.

In the U.S., a 25 basis-point rate cut in July is priced in, along with an almost 20% chance of a 50 basis point cut.

Investors will be looking to U.S. retail sales figures due Tuesday and company earnings for signs of how shoppers and businesses are weathering the slowdown.

Against a basket of currencies the dollar held near a 10-day low at 96.865.

It gained against the yen to break 108.00, though still remains underneath resistance at 108.98. Monday is a national holiday in Japan and dollar-yen trading volumes were thin.

The greenback rose 0.1% to $0.9853 against the Swiss franc. The euro slipped back to $1.265 though remains stuck in a two-cent range that has held the single currency since June.

Dollar slips after Powell bolsters rate cut bets; bitcoin sinks

The dollar eased on Thursday after Federal Reserve Chairman Jerome Powell set the stage for a rate cut later this month, vowing to “act as appropriate” to ensure the world’s biggest economy will be able to sustain a decade-long expansion.

In testimony to Congress, Powell pointed to “broad” global weakness that was clouding the U.S. economic outlook amid uncertainty about the fallout from the Trump administration’s trade conflict with China and other nations.

“Chairman Powell sounded dovish on most dimensions. This is slightly surprising given benign trade developments following last month’s G20 meeting and the recent rebound in nonfarm payrolls,” said Michael Swell, co-head of global fixed income portfolio management at Goldman Sachs Asset Management.

“Overall, his comments around slowing growth against a backdrop of muted inflation and elevated uncertainties is consistent with ‘insurance rate cuts’ this year.”

Adding to a generally dovish tone in his testimony, the minutes from the Fed’s previous policy meeting showed many policymakers thought more stimulus would be needed soon, reviving speculation of an aggressive rate cut.

The euro rose 0.2% in Asia to $1.1274, extending gains after a 0.4% rise the previous day.

The dollar dipped 0.5% to 107.96 yen, extending its slide from a six-week high of 108.99 set on Wednesday before Powell’s testimony.

The dollar’s index against six major currencies slipped 0.2% to 96.877, extending its losses into a second session after Powell’s first day of testimony, and turned negative on the week.

Money market futures have jumped to price in around a 30% chance that the Fed will cut rates by 50 basis points at its next policy review on July 30-31 – a scenario that had been priced out after Friday’s strong U.S. jobs data.

A 25-basis-point cut is already fully factored in.

“A rate cut in July is completely sealed now. But on the other hand, Powell dropped little hint on what he would do after that, as he sounded quite optimistic on the economy,” said Kyosuke Suzuki, director of forex at Societe Generale.

“That uncertainty, I think, will most likely keep the dollar in fairly tight ranges in coming weeks,” he said.

Elsewhere, the British pound also bounced off from six-month lows to trade at $1.2529 <GBP=D4>.

But it is still down on the week as the British currency has been dogged by Britain’s economic gloom and a fast-approaching Brexit deadline.

A raft of dismal UK data and the risk of crashing out of the European Union without agreeing transitional trade arrangements have forced the Bank of England to change its upbeat assessment of the economy.

In contrast, the Canadian dollar moved closer to last week’s eight-month high, as the Bank of Canada showed no sign that it would match potential interest rate cuts from the Fed, making clear it had no intention of easing monetary policy.

The Canadian dollar stood at C$1.3052 per U.S. dollar, not far from C$1.3038 touched a week ago.

In the crypto market, bitcoin shed as much as 8.5% on Wednesday after Fed Chairman Powell made strong comments against Facebook’s digital currency plans. Bitcoin was last down 3.1% at 11,722.21 on Thursday.

Powell said Facebook’s Libra “cannot go forward” until many serious concerns were addressed, comments that pressured the project and dented the price of the original cryptocurrency bitcoin.