Currency market update | Dollar steady ahead of Powell testimony

US dollar rate index news: The US dollar was largely steady on Wednesday, as traders avoided making large bets ahead of congressional testimony from Federal Reserve Chair Jerome Powell, as well as the European Central Bank rate decision and US jobs data later this week.

The absence of catalysts kept the dollar in a tight range, having slipped overnight on data from that Institute for Supply Management (ISM) that showed the US services industry growth slowed a bit in February.

The currency is up 2.4 per cent for the year, buoyed by better-than-expected US economic data, but it has stalled in recent sessions as investors look for further clarity on Fed policy.
The February US jobs report on Friday stands as a test ahead, with the potential to rock markets. A surprise to the upside could add to the dollar's rise this year.

Traders were also waiting on Fed Chair Powell's first day of testimony before Congress on the state of the US economy. Powell is expected to reinforce that the Fed will wait for more data before making any rate cuts.

"A reiteration of this message is unlikely to alter current market pricing for a June start to the FOMC’s rate cut cycle, and should therefore have limited impact on the USD," said Carol Kong, a currency strategist at the Commonwealth Bank of Australia.

Markets have priced in about a 60 per cent chance of a rate cut in June, according to the CME FedWatch tool. The dollar index , which measures the greenback's strength against a basket of six currencies, was mostly unchanged at 103.82.

Elsewhere, the ECB is widely expected to leave interest rates at a record 4 per cent at its policy meeting on Thursday. The focus will instead be on clues about when rates might start to fall, as well as on the central bank's updated economic projections.

The euro remained firm at $1.0852. Sterling was down 0.1 per cent at $1.2695 ahead of the British budget on Wednesday. The yen held around 149.92 per dollar, after the greenback overnight gave up recent gains against the Japanese currency, retreating from last week's high of 150.85.