The dollar hit daily highs on Tuesday morning following testimony from Federal Reserve Chairman Jerome Powell. Powell added to investor confidence, claiming that the economy’s stable inflation and strong growth are two factors that should keep the central bank’s plan to increase interest rates gradually in place.
The testimony sent the US Dollar Index up 0.32% by 11:00 am EST to hit 94.57.
Powell’s testimony came a day after forex traders lost sentiment. The dollar index, which measures the greenback against a basket of other currencies, slipped on Monday, as trade conflicts and economic data increased investor fears.
China’s economic data, released overnight, showed that the country’s economy has slowed in the second quarter, which investors and analysts were expecting. China’s GDP rose at an annual rate of 6.7% in the three-month period ended June. The figure is down from 6.8% in the first quarter.
China has also filed complaints against the United States, which is threatening to impose 10% tariffs on $200 billion of Chinese imports. The complaints were filed with the World Trade Organization. China has stated in the past that they’re willing to retaliate if further tariffs are imposed.
United States President Donald Trump also caused concern over the weekend when he called the European Union a “foe.” The comments are related to how the European Union trades with the United States and may signal further discord between the US and the EU.
Powell’s comments have erased Monday’s losses, with the USD/JPY reaching six-month highs. The pairing rose 0.52% to hit 112.86, but it has since settled to a gain of 0.41% to hit 112.75. The figure is the highest since January 9.
The firmer dollar has caused the EUR/USD to slide 0.15% to trade at 1.1692.
GBP/USD is down 0.42% to trade at 1.3180 after falling as much as 0.55% earlier in the day. Political uncertainty was the key factor behind the currency pairing slipping. Investors are awaiting a UK parliament vote later in the day. Theresa May is facing increased pressure related to Brexit that is causing further political divide in the UK.
EUR/GBP is up 0.26% to 0.8871.
The pound is also under pressure from disappointing jobs data. Unemployment expanded by 7.8 thousand, beating estimates of unemployment rising by just 2.3 thousand. Wage growth did meet expectations, rising 2.5%.
Investors will remain focused on increased tariff threats, which Dallas Fed President Robert Kaplan claims would cause him to downgrade his economic outlook if tensions continue to rise.