Dollar Stabilizes After Sharp Rebound; Fed Officials in Focus

The U.S. dollar experienced a slight decline on Thursday as it stabilized after a significant rebound the previous night, with traders awaiting speeches from key Federal Reserve officials.

At 04:40 ET, the Dollar Index, which measures the dollar against a group of six other currencies, was down 0.1% at 100.565, following an increase of nearly 0.6% on Wednesday—its largest one-day increase since June 7.

### Dollar Awaiting Clarity from Fed Officials

The U.S. dollar found stability after a strong overnight rebound as investors reevaluated the potential pace of future U.S. interest rate cuts, particularly after the Federal Reserve initiated its easing cycle with a substantial 50 basis-point reduction earlier this month.

A number of Fed officials are scheduled to speak on Thursday, and traders are eager for further insights, as the communications after the last Fed meeting have been somewhat mixed. Fed Governor Adriana Kugler expressed strong support for the rate cut, while Fed Governor Michelle Bowman warned against aggressive cuts. Meanwhile, Atlanta Fed President Raphael Bostic indicated that the central bank should not rush to lower rates.

“Chair Powell will deliver pre-recorded opening remarks, followed by a host of other officials: Collins, Bowman, Williams, Barr, Cook, and Kashkari. Their comments may provide additional context regarding their individual Dot Plot submissions,” analysts at ING noted.

The economic calendar is also busy on Thursday, with reports on the second-quarter GDP, weekly jobless claims, and August’s durable goods orders expected.

### Euro Maintains Elevated Levels

In the European market, the EUR/USD pair saw a slight increase to 1.1132, following a sharp pullback from a peak of 1.1214, which was not reached since July of the previous year, amid a quiet economic data schedule in the eurozone.

“We may observe more fluctuations around the 1.110-1.120 range unless U.S. data provides clearer guidance. The 2-year EUR:USD swap rate gap, now at -95bp, suggests that a major correction in the pair is unlikely,” ING added.

The GBP/USD pair was up 0.1% at 1.3342, having earlier reached 1.3430 on Wednesday, marking the highest level since February 2022.

The USD/CHF pair fell 0.2% to 0.8488 following a 25 basis-point cut to the benchmark interest rate by the Swiss National Bank. Although this decrease was anticipated and marks the third consecutive cut, some had speculated a larger reduction given Switzerland’s lowest-in-the-G10 inflation rate of 1.1% last month, which is centrally positioned within the SNB’s target range.

### Chinese Yuan Gains from Stimulus

The USD/CNY pair was down 0.2% at 7.0187, close to its lowest level since May 2023, following a series of significant stimulus measures from Beijing aimed at bolstering economic growth.

The USD/JPY pair rose 0.1% to 144.87, moving further away from its lows observed in 2024 prior to the upcoming elections for the Liberal Democratic Party, which will determine Japan’s next Prime Minister. Analysts anticipate that a change in leadership may hinder the Bank of Japan’s plans to raise interest rates in the near future.