US Dollar Steadies on Dovish Comments from Federal Reserve Official

The US dollar was little changed against the euro on Friday, as dovish comments from an official in the Federal Reserve prevented the greenback from moving higher. Economic data in the United States today lacked enough strength to support the US currency as it declined against the British pound and the Japanese yen.

New York Federal Reserve President William Dudley said today that the US central bank has enough space to move gradually to tighter monetary policy. Dudley stated that he believes the Federal Reserve will likely raise rates two more times in the current year, but added that the central bank might pause raising rates in 2018 as it works on shrinking its balance sheet.

Dudley is a permanent member of the Federal Open Market Committee, and is widely considered as one of its most important members. In his latest comments, he said that the Federal Reserve should soon begin reducing its $4.5 trillion balance sheet, which may mean the bank will put tightening its monetary policy aside for a short term.

Meanwhile on the economic front, a report released by the Bureau of Economic Analysis showed that consumer spending lagged behind recent gains in consumer confidence. The report said that personal consumption expenditures rose 0.1% in February, while personal income increased 0.4%.

The Conference Board said on Tuesday that its consumer confidence index surged to 125.6 in March, from 116.1 in February. Despite the gain in personal income and overall confidence, consumers in the United States remained hesitant toward spending more money, which damped enthusiasm between investors. Consumer spending accounts for about 65% of the gross domestic product in the United States.

EUR/USD traded at 1.0691 as of 16:25 GMT on Friday, from 1.0670 at 09:55 GMT, the pair’s lowest level since March 15. EUR/USD began the day at 1.0684. GBP/USD was at 1.2538, from 1.2543 at 16:20 GMT, the pair’s highest point since March 28. GBP/USD started trading today at 1.2479. USD/JPY moved lower to 111.44, after starting the day at 111.78.

The Dollar Index, which measures the strength of the US currency against its major peers, dropped to 100.31 as of 16:24 GMT, from 100.41 yesterday.

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