WASHINGTON (dpa-AFX) - The U.S. dollar lost ground against most of its major rivals on Wednesday, reacting to Federal Reserve Chairman Jerome Powell's remarks about the economy and the central bank's monetary policy.
Powell said in his testimony before the House Financial Services Committee that 'substantial further progress' towards employment and price stability goals is 'still a ways off.'
Powell's comments signal that the central bank may not tighten its monetary policy anytime soon. Powell said the Fed will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete.
Powell reiterated that the central bank will provide advance notice before announcing any decision to make changes to its bond purchases.
Powell acknowledged that inflation has increased notably and will likely remain elevated in coming months but predicted inflation would moderate as the effects of the production bottlenecks unwind.
The Beige Book noted the U.S. economy strengthened further from late May to early July, with the pace of growth described as moderate to robust.
The Labor Department said its producer price index for final demand surged up by 1% in June after climbing by 0.8% in May. Economists had expected producer prices to rise by 0.6%.
The report also showed the annual rate of producer price growth accelerated to 7.3% in June from 6.6% in May, reaching the highest level since 12-month data were first calculated in November of 2010.
The dollar index drifted down to 92.35, giving up more than 0.4% from Tuesday's close.
The dollar weakened to $1.1840 against the Euro, down more than 0.5% compared to the previous close of $1.776. According to the report released by Eurostat, industrial output in the zone fell 1% on a monthly basis in May, reversing a revised 0.6% rise in April. The pace of decline exceeded the economists' forecast of -0.2%.
Against Pound Sterling, the dollar dropped to $1.3862 from $1.3816. Official data showed that U.K. consumer inflation rose to 2.5% in June from 2.1% in May. The rate was forecast to climb to 2.2%. On a monthly basis, consumer prices gained 0.5%, following a 0.6% rise in May. The expected rate was 0.2%.
The Yen strengthened to 109.96 a dollar, from 110.63 a dollar.
Against the Aussie, the dollar slipped to 0.7481, nearly 0.5% down from Tuesday's close of 0.7447. Consumer confidence in Australia remains firm in July, the latest survey from Westpac Bank showed on Wednesday as its sentiment index gained 1.5% to a score of 108.8 - up from 107.2 in June.
The Swiss franc firmed to 0.9144 from 0.9183. The Loonie was flat at C$1.2512 a dollar. The Bank of Canada today left its key overnight rate unchanged at 0.25% as expected but adjusted the quantitative easing program to a target pace of $2 billion from $3 billion per week.
The Bank now expects GDP growth of around 6% in 2021, a little slower than was expected in April, but has revised up its 2022 forecast to 4.5% and projects 3.25% growth in 2023. Policymakers expect inflation to remain above 3% through the second half of this year and ease back toward 2% in 2022.
Data released by Statistics Canada showed manufacturing sales in Canada dropped by 0.6% in May, after sliding 2.1% in April.
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