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Market Update

• Posted by currencies in Bank of England, Currency, Dollar, Economy, Fed, Inflation, Rate Cuts, UK, Uncategorised
• June 2, 2023
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The dollar headed for its largest weekly fall since mid-January as the view took hold among investors that the Federal Reserve will forgo an interest rate hike this month, which would diminish the greenback’s appeal to non-U.S. buyers.

The U.S. Senate late on Thursday passed bipartisan legislation backed by President Joe Biden that lifts the government’s $31.4 trillion debt ceiling, a day after the House of Representatives approved the bill.

And so, the U.S. averts what would have been a first-ever and catastrophic default. The Treasury Department had warned it would be unable to pay all its bills on June 5 if Congress failed to act.

Markets though seemed to have moved on to focus on what the Fed will do in two weeks as U.S. economic data bolstered the case for the Fed to stand pat.

Dovish rhetoric from Fed officials, including comments by Philadelphia Federal Reserve President Patrick Harker on Thursday that it was “time to at least hit the stop button” on rate hikes, has also helped to lift sentiment.

Philadelphia Fed President Patrick Harker said on Thursday “it’s time to at least hit the stop button for one meeting and see how it goes”, referring to the June 13-14 meeting.

A day earlier, Fed Governor Philip Jefferson said “skipping a rate hike at a coming meeting would allow the committee to see more data before making decisions about the extent of additional policy firming”.

Some softness in U.S. manufacturing data overnight supported the case for a pause, although jobs figures continue to print hot, putting even more focus than usual on the monthly non-farm payrolls report later in the day.