Dollar Slips as Fed Maintains Caution; NZD Dips on Rate Cut Hints

The dollar hovered near three-week lows following cautious comments from Federal Reserve Chair Jerome Powell, who suggested that a rate cut is contingent on more evidence of declining inflation. The New Zealand dollar fell due to signals from the central bank about potential rate cuts, while the market awaits the upcoming consumer price index report.

The dollar hovered near three-week lows on Wednesday, influenced by a cautious tone from Federal Reserve Chair Jerome Powell. Powell indicated that a rate cut is not appropriate until there's greater confidence that inflation is moving towards the Fed's 2% target.

Meanwhile, the New Zealand dollar dipped after the country's central bank opened the door to potential rate cuts. Powell's statement came during his first day of testimony to Congress, highlighting a cooling labour market and two-sided risks that prevent focusing solely on inflation.

Traders are now closely watching the upcoming consumer price index (CPI) report for June, which could impact market sentiment and the timing of U.S. rate cuts.

(With inputs from agencies.)