Dollar Drifts Ahead of Key Fed Speech as Economic Worries Grow

The dollar held steady against most currencies on Wednesday as traders braced for U.S data expected to show a slowdown in durable goods orders and a key speech by Federal Reserve Chairman, Jerome Powell.
The yuan rose toward a seven-month high after U.S. and Chinese trade officials reaffirmed their commitment to a Phase 1 trade deal, which eased concerns about a diplomatic standoff between the world’s two-largest economies.
The greenback took a hit after data on Tuesday showed U.S. consumer confidence tumbled to the lowest in more than six years due to concerns about coronavirus-induced job losses.
Traders will look to Powell’s speech on Thursday at the annual Jackson Hole retreat to determine what steps the Fed is willing to take to safeguard a fragile economic recovery.
“I expect Powell to use forward guidance to send a dovish message that rates will remain low for a long time, which feeds into dollar weakness” said Minori Uchida, head of global market research at MUFG Bank in Tokyo.
“You could say we are in a long-term correction of excessive dollar strength”.
Against the euro, the dollar stood at $1.1816 on Wednesday following a 0.4 per cent decline in the previous session.
The British pound bought $1.3138 having risen 0.7 per cent against the dollar on Tuesday.
Sterling has managed to shrug off a lack of progress in trade negotiations between Britain and the European Union.
The dollar bought 0.9090 Swiss franc, close to the lowest in more than five years against the safe harbour currency.
The dollar was locked into a narrow range against the yen, last trading at 106.43.
Powell’s speech at Jackson Hole – held online due to the coronavirus outbreak – is by far the biggest event of the week, but the data calendar leading up to Thursday has been discouraging.
Data later on Wednesday is forecast to show growth in U.S durable goods orders slowed in July, following from the U.S consumer confidence report for August.
The U.S. consumer confidence fell to the lowest since May 2014, highlighting policymakers’ concerns about the economy.
The onshore yuan rose to 6.9002 per dollar, approaching a seven-month high after Washington and Beijing affirmed their trade deal.
The mood also brightened after Ant Group, Alibaba’s fintech arm and China’s dominant mobile payments firm, filed for a dual listing in Hong Kong and Shanghai to raise as much as $30 billion in what would be the world’s largest initial public offering.
The Australian dollar was little changed at $0.7195 as traders monitor a coronavirus outbreak in the state of Victoria.
The New Zealand dollar last bought $0.6552.