U.S. Dollar Higher As Hopes For Aggressive Fed Rate Cuts Wane

The U.S. dollar spiked higher against its key counterparts in the European session on Wednesday, as hopes for a rate cut in July receded after Fed Chairman Jerome Powell remarked that the central bank is "insulated from short-term political pressures."

Speaking in New York on Tuesday, Powell remarked that the Fed is independent, insulated from short-term political pressures.

Powell resisted President Donald Trump's call to cut interest rates, saying that monetary policy should not overreact to any individual data point or short-term swing in sentiment.

Separately, St. Louis Fed President Jim Bullard, a well-known policy dove, said that a 50 basis point rate cut in July would be too much.

"I don't think we have to take huge action," Bullard told in an interview on Bloomberg.

Data from the Commerce Department showed that new orders for U.S. manufactured durable goods unexpectedly fell sharply in May.

The durable goods orders tumbled by 1.3 percent in May after plunging by a revised 2.8 percent in April.

The currency has been trading higher against its most major rivals in the Asian session following Fed comments.

The greenback strengthened to a 5-day high of 0.9785 against the franc, from Tuesday's closing value of 0.9755. The currency is seen finding resistance around the 1.00 level.

The greenback that finished Tuesday's New York session close at 107.16 against the yen firmed to a 6-day high of 107.76. If the currency rises further, 111.00 is possibly seen as its next resistance level.

The U.S. currency ticked higher to 1.1351 against the euro and held steady thereafter. At yesterday's close, the pair was worth 1.1366.

Survey data from market research group GfK showed that Germany's consumer sentiment is set to weaken in July as income expectations suffer significant setbacks amid fears of job losses among shoppers.

The forward-looking consumer sentiment index dropped more-than-expected to 9.8 in July from 10.1 in June. The score was forecast to fall marginally to 10.0.

The greenback rose back to 1.2664 against the pound, a pip short of a 6-day high of 1.2663 seen at 3:00 am ET. The next possible resistance for the greenback is seen around the 1.24 area.

The JobsOutlook survey by the Recruitment & Employment Confederation showed that UK employers' confidence on the economy and their hiring and investment intentions improved since the extension of the Brexit deadline.

Employers' confidence in making hiring and investment decisions improved with the index rising 4 percentage points to positive 1.

On the flip side, the greenback weakened to near a 4-month low of 1.3142 versus the loonie and more than 2-week low of 0.6995 against the aussie from yesterday's closing values of 1.3169 and 0.6960, respectively. On the downside, 1.30 and 0.72 are likely seen as the next support levels for the greenback against the loonie and the aussie, respectively.

The greenback also fell to more than a 2-month low of 0.6686 against the kiwi, from an early 2-day high of 0.6593. Further downtrend may take the greenback to a support around the 0.68 region.