US dollar climbs as Fed hints at further rate hikes

The US dollar rallied towards the end of Friday’s session after Federal Reserve Chair Jerome Powell dropped hints that the US central bank may continue raising interest rates.

So far this morning, the pound is mixed, with GBP/EUR wavering up to €1.1661 and GBP/USD fluctuating around $1.2630. GBP/CAD has edged up to CA$1.7169, while GBP/AUD and GBP/NZD have fallen to AU$1.9580 and NZ$2.1291, respectively.

This morning, German consumer confidence unexpectedly deteriorated to a four-month low. This could weigh on EUR through today’s session.

What’s been happening?

After a subdued start to the session, the US dollar eventually jumped on Friday after Fed chief Jerome Powell took to the stage at the Jackson Hole Economic Symposium.

Powell left the door open to further policy tightening, arguing that inflation is still far too high and upside risks persist. These hawkish remarks saw USD jump higher.

Meanwhile, the pound was muted on Friday. Sterling initially attempted a recovery after a difficult week, but this fizzled out as the session progressed.

Turning to the euro, a worse-than-forecast deterioration in German business morale hit EUR early on Friday. However, EUR managed to recover by the close of the week’s session.

What’s coming up?

Today’s session kicked off with Germany’s latest consumer confidence report. Household morale slipped to its lowest level in four months heading into September, which is putting pressure on the single currency this morning.

Looking forward, the latest US JOLTs job openings figure could impact the ‘greenback’. If the report shows signs that the American labour market remains tight, USD could climb.

At the same time, US consumer confidence data for August is also out. A slight downtick could dent the US dollar.

Meanwhile, thin trading conditions around the pound could leave Sterling without a clear direction. GBP investors may turn to domestic headlines for fresh impetus.