U.S. Dollar Falls Sharply As Fed Powell Maintains Dovish Tone

The U.S. dollar came under pressure in the Asian session on Thursday, after Federal Reserve Chair Jerome Powell rejected the likelihood of an immediate tapering of the bond buying program, saying that the economy is "still a ways off" from reaching a standard of "substantial further progress" to withdraw stimulus measures.

The Fed noted that the economy has made progress towards its goals for inflation and labor market since the June meeting, but the threshold to begin tapering bond purchases has not been achieved.

Powell said that inflation has increased notably and would likely remain elevated in coming months before moderating.

Regarding job growth, the Fed chief remarked that "there is still a long way to go" to consider a shift in policy.

The U.S. Senate voted to push forward a bipartisan infrastructure plan amounting to $550 billion, which includes funding for roads, bridges, broadband and other physical infrastructure.

The five-year spending package would be paid for using COVID-19 relief funds, illegally paid unemployment benefits during the crisis and unutilized federal unemployment funds.

U.S. GDP data for the second quarter, due at 8:30 am ET, is expected to show an annualized growth of 8.5 percent, up from 6.4 percent in the previous quarter.

The greenback weakened to 1.3950 against the pound, its lowest level since June 24. The greenback is likely to test support around the 1.42 level.

The greenback dropped to 2-day lows of 109.68 against the yen and 0.6986 against the kiwi, down from Wednesday's closing values of 109.91 and 0.6955, respectively. The greenback is seen challenging support around 108.00 against the yen and 0.72 against the kiwi.

The greenback slipped to more than a 2-week low of 1.1870 against the euro and a fresh 2-week low of 1.2472 against the loonie from yesterday's closing values of 1.1843 and 1.2521, respectively. The greenback is poised to find support around 1.21 against both the euro and the loonie.

The greenback that closed Wednesday's trading at 0.9100 against the Swiss franc and 0.7374 against the aussie depreciated to a 1-1/2-month low of 0.9080 and a 6-day low of 0.7395, respectively. The greenback may face support around 0.88 against the Swiss franc and 0.77 against the aussie.

Looking ahead, U.K. mortgage approvals for June, German jobless rate and Eurozone economic confidence index for July are set for release in the European session.

At 8.00 am ET, Destatis is scheduled to issue Germany's flash consumer prices for July.

U.S. GDP data for the second quarter, pending home sales for June and weekly jobless claims for the week ended July 24 are due in the New York session.