Dollar Gains Amid Fed's Mixed Signals: Inflation Progress, Job Market Cooling

The U.S. dollar advanced after Federal Reserve Chair Jerome Powell noted inflation progress and a cooling job market but gave no clear signal on imminent interest rate cuts. Despite improvements, inflation remains above target and further good data is needed for a cut. Markets reacted with a slight increase in the dollar's value.

The U.S. dollar gained momentum on Tuesday following Federal Reserve Chair Jerome Powell's comments acknowledging progress in inflation and a cooling job market. Despite these advancements, Powell stopped short of signaling that the U.S. central bank is close to cutting interest rates. He emphasized that inflation 'remains above' the Federal Reserve's 2% target but has improved in recent months.

In Congressional remarks, Powell highlighted that the job market has cooled, posing 'two-sided risks.' His reluctance to provide a clear dovish economic outlook left some market participants dissatisfied. 'The market is counting the days until we get a rate cut signal from Powell,' said Adam Button, chief currency analyst at ForexLive in Toronto. 'When he didn't deliver that, we saw a little bit of U.S. dollar buying.'

The dollar index rose 0.15% to 105.13, rebounding from a recent low. Market analysts noted that while Powell's comments offered limited new insights, they did acknowledge a cooling labor market. The economic focus now shifts to Thursday's consumer price index report, with expectations of modest monthly gains. Meanwhile, the euro dipped slightly as investors adjusted to political uncertainties in France, and the Japanese yen and sterling experienced minor fluctuations.

(With inputs from agencies.)