Dollar Loses Ground Against Major Rivals Despite Powell's Hawkish Comments

(RTTNews) - The U.S. dollar shed ground against its major counterparts on Wednesday despite Federal Reserve Chair Jerome Powell, who testified before the House Financial Services Committee today, reiterating that the central bank will likely continue raising rates to contain inflation.

Investors also assessed UK inflation data and looked ahead to the Bank of England's policy announcement, due on Thursday.

Powell reiterated the Fed is likely to continue raising interest rates in an effort to contain stubbornly elevated inflation.

"Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year," Powell said.

The Fed left rates unchanged last week, but the central bank's latest projections suggest it plans to resume raising rates later this year, forecasting a rate of 5.6% by the end of 2023.

If the Fed decided to revert to its recent quarter-point increases, the forecast suggests the central bank will raise rates two more times this year.

The forecast for additional rate hikes come as Powell noted inflation pressures continue to run high and said the process of getting inflation back to the Fed's 2% target has a "long way to go."

In European economic news, official data showed that U.K. consumer prices logged a steady growth rather than a slowdown in May. Core inflation accelerated further, adding pressure on the Bank of England to raise the benchmark rate by half a percentage point.

Consumer price inflation came in unchanged at 8.7% in May while analysts had forecast the rate to ease to 8.4%. Core inflation that excludes energy, food, alcohol and tobacco climbed to 7.1%, which was the highest since March 1992.

The dollar index dropped to 102.02, losing more than 0.5%.

Against the Euro, the dollar weakened to 1.0989 from 1.0920, and was roughly flat against Pound Sterling at 1.2766.

Against the Japanese currency, the dollar is up, fetching 141.89 yen a unit, compared with 141.44 yen on Wednesday.

The dollar is down marginally against the Aussie at 0.6797. Against Swiss franc, the dollar is weak, fetching CHF 0.8930 a unit, more than 0.5% down from the previous close of CHF 0.8979.

The Loonie up against the dollar at C$1.3167 as oil prices surged higher on optimism about higher demand in the U.S.