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Dollar Gains After Fed Comments

The dollar this morning as expectations dwindled for aggressive cuts in U.S. interest rates after comments by Federal Reserve officials.

Fed Chairman Jerome Powell stressed the central bank’s independence from U.S. President Donald Trump, who is pushing for rate cuts. St. Louis Fed President James Bullard, considered one of the most dovish U.S. central bankers, surprised some investors by saying a 50-basis-point cut in rates “would be overdone.”

The dollar fell last week after policymakers opened the door to rate cuts in coming months. Some traders thought the Fed might cut rates by as much as 50 basis points next month.

However, the overnight comments tamped down those expectations, pulling the dollar up from three-month lows against a basket of other currencies.

Commerzbank strategists said a 50-basis-point cut would indicate the Fed was in a hurry, increasing the likelihood more would be coming than the market expected. Money markets are currently pricing in up to three rate cuts this year.

Elsewhere, the pound remained near five-month lows after Boris Johnson, the leader in a contest to replace Prime Minister Theresa May, reiterated his commitment to leave the European Union with or without an agreement by Oct. 31.

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