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Dollar Slides As Fed Powell's Cautious Remarks Bolster Rate Cut Hopes

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The U.S. dollar drifted lower against its key opponents in the European session on Wednesday, after Federal Reserve Chair Jerome Powell cautioned that worries about the strength of the global economy and continued trade tensions posed challenges to U.S. economic outlook, supporting hopes for a rate cut by the Federal Reserve as early as this month.

In his prepared remarks to the House Financial Services Committee, Powell struck a downbeat tone on economy, saying that crosscurrents re-emerged, creating greater uncertainty to U.S. economy.

The Fed Chairman noted that the Fed pledged after the June meeting to "act as appropriate" to sustain the economic expansion, pointing out many participants saw the case for a somewhat more accommodative monetary policy had strengthened.

Based on incoming data and other developments since the June meeting, it appeared that uncertainties around trade tensions and concerns about global growth continue to weigh on the U.S. economic outlook, Powell cautioned.

Weak inflation is likely to be even more persistent than the Committee currently anticipate, he added.

Also in focus is the Fed minutes from the June 18-19 meeting, due at 2:00 pm ET.

At the meeting, the Fed opened the door for rate cuts by removing the description of its rate policy as patient.

The Fed next meets on July 30-31 and markets are widely expecting a rate cut of 25 basis points.

The currency held steady against its major counterparts in the Asian session, excepting the yen.

The greenback depreciated 0.3 percent to a 2-day low of 108.66 against the yen, following a 1-1/2-month high of 108.99 set at 8:45 pm ET. At yesterday's close, the pair was worth 108.85. Should the greenback continues its downtrend, 106.00 is possibly seen as its next support level.

Data from the Bank of Japan showed that Japan producer prices fell 0.5 percent on month in June.

That missed expectations for a monthly decline of 0.1 percent, which would have been unchanged from the May reading.

The greenback was down by 0.4 percent against the franc, falling to a 5-day low of 0.9896. The pair was valued at 0.9935 when it ended deals on Tuesday. Further downtrend may lead the greenback to a support around the 0.97 region.

The greenback fell to a 5-day low of 1.1247 against the euro, after rising to 1.1202 at 8:30 pm ET. This marked a drop of 0.3 percent from Tuesday's closing quote of 1.1208. The greenback is seen finding support around the 1.14 region.

Having climbed to 1.2444 against the pound at 2:15 am ET, the greenback pulled back, dropping 0.6 percent to 1.2521. The pair had closed Tuesday's deals at 1.2458. Next key support for the greenback may be located around the 1.26 level.

Data from the Office for National Statistics showed that UK gross domestic product grew in the month of May after a decline in April.

GDP rose 0.3 percent month-on-month in May following a 0.4 percent decline in April. The expansion was in line with economists' expectations.

The greenback weakened to a 2-day low of 1.3077 against the loonie, down by 0.5 percent from a high of 1.3138 at 2:45 am ET. The greenback ended yesterday's trading at 1.3126 against the loonie. Extension of the greenback's downward trading is likely to see it challenging support around the 1.30 mark.

Following nearly a 3-week high of 0.6910 set at 3:45 am ET, the greenback reversed direction and reached as low as 0.6960 against the aussie. The aussie-greenback pair was worth 0.6927 at yesterday's close. The greenback is poised to seek support around the 0.715 level.

The greenback declined to a 2-day low of 0.6652 against the kiwi, from near a 3-week high of 0.6565 seen at 10:00 pm ET. The greenback was trading at 0.6605 a kiwi at yesterday's New York session close. The currency is likely to face support around the 0.68 level, if it weakens again.

Data from Statistics New Zealand showed that New Zealand food prices dropped 0.7 percent on month in June - both seasonally adjusted and unadjusted.

That follows the 0.7 percent monthly increase in May.

In today's events, the Federal Reserve's minutes from the June meeting are scheduled for release in the New York session.

At 1:30 pm ET, Federal Reserve Bank of St. Louis President James Bullard will deliver a speech at the Official Monetary and Financial Institutions Forum Meeting in St. Louis.

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