The greenback jumped higher after being driven by hawkish statements from Federal Reserve (Fed) policymakers about tightening in their monetary policy.
Fed vice -chairman Richard Clarida said he was ‘certain’ to see the central bank announce a reduction in bond purchases by the end of the year if the conditions for achieving major progress are met.
He also added that the conditions for raising interest rates will be met by the end of 2020, if inflation and employment meet his forecasts.
Three other policymakers on Wednesday also indicated their willingness to start making cuts. For one, Louis Fed President James Bullard said a faster cut would pave the way for a rate hike next year, if needed.
The dollar index jumped around 0.3% following the statement, curing early market frustration after being shown by ADP private employment data readings that recorded an increase of just 330,000 jobs in July, far off from expectations for an increase of 695,000.
In addition, the strengthening of the US dollar was also supported by the reading of the ISM survey services PMI data which showed the strongest increase in the sector since 1997.
The pound slipped below 1.39000 following the resurgence of the US dollar, with market focus now shifted to the Bank of England (BOE) policy meeting tonight.
The euro also depreciated due to the surge exhibited by the greenback, pushing it to trade around the weekly low of 1.1840.
The New Zealand dollar is still holding up despite a slight depreciation, which is still supported by encouraging employment data readings and boosting investors ’expectations for a faster interest rate hike from the New Zealand Central Bank.
