What you need to know:
> Dollar rally gathers momentum after Jay Powell testimony.
> Expectations for gradual rate rises remain after Fed chairman sounds bullish.
> US stocks mixed in early trade.
> Pound falls to lowest level since September.
> Yen falls below ¥113 per dollar for first time in five months.
> Brent oil heads towards $71 a barrel.
“Jay Powell still seems to be upbeat on the US economy and its low unemployment, and hence is going to be sticking to gradual rate rises ahead ‘for now’. For emerging market FX that’s about as bad news as one could hope to hear, and unsurprisingly the dollar is once again on the up” — Michael Every, senior strategist at Rabobank.
The dollar is rising across the board as investors remain focused on Federal Reserve chairman Jay Powell’s testimony to Congress.
Having expressed confidence in the outlook for the US economy, Mr Powell is due to appear before the Senate banking committee for a second day. He has already pointed to continued strength in the jobs market and suggested that risks from US trade policy could be balanced by fiscal stimulus.
The dollar index is up a further 0.3 per cent at 95.19 — after rising 0.6 per cent over the previous session — putting it sight of a recent one -year high.
The US currency’s firm tone comes in spite of a flat performance by Treasuries, with the 10-year and two-year yields both unchanged at 2.86 per cent and 2.61 per cent respectively.
That leaves the spread between them — the yield curve— near its lowest level in 11 years.
Forex and fixed income:
The pound is down 0.5 per cent at $1.3041, its lowest level since last September, after weak data knocked expectations of an August rate rise from the Bank of England and coincided with growing risks from political turmoil around Brexit.
Consumer price inflation for June sharply missed forecasts, showing a decline of 0.1 per cent rather than a forecast rise of 0.3 per cent.
Over the past two sessions, sterling is down by 1.6 per cent. Against the euro, it is 0.4 per cent weaker for the session, with £0.8923 required for a unit of the shared currency.
The yield on two-year UK government debt is down 2 basis points at 0.73 per cent, with the benchmark 10-year yield down 5bp at 1.21 per cent.
The wider trend for a stronger dollar leaves emerging market currencies looking exposed, with Mexico’s peso weakening by 0.6 per cent against the dollar. Russia’s rouble is 0.8 per cent weaker and the Brazilian real is down 0.4 per cent.
The euro is down 0.2 per cent at $1.1636, and in sight of the one-month low of $1.1610 it hit at the end of last week.
Japan’s yen slipped past the ¥113 per dollar mark for the first time since January. It weakened as much as 0.2 per cent to ¥113.13 per dollar.
New York’s S&P 500 is down less than 0.1 per cent in mid-morning New York trade at 2,807, having risen 0.4 per cent on Tuesday. Energy stocks are once again topping the list of fallers, while industrials and financials are higher.
The tech-heavy Nasdaq Composite index is down 0.2 per cent.
In Europe, London’s FTSE 100 is up 0.5 per cent, with Frankfurt’s Xetra Dax rising 0.9 per cent.
Brent crude is trading under $72 and heading back towards the previous session’s three-month intraday low of $71.35. The international benchmark is down 0.8 per cent at $71.56 a barrel.
Gold is down $4 at a fresh one-year low of $1,223 an ounce.