Forex Today: Comments from Fed officials to drive US Dollar's action

Here is what you need to know on Wednesday, February 8:

The US Dollar Index snapped a three-day winning streak on Tuesday after having fluctuated wildly with the initial reaction to FOMC Chairman Jerome Powell's comments on the policy outlook. In the absence of high-impact macroeconomic data releases, comments from Fed officials, including New York Fed President Williams, Atlanta Fed President Bostic and Minneapolis Fed President Kashkari, will be watched closely by market participants on Wednesday.

In an interview with The Economic Club of Washington, D.C., Powell said that the latest jobs report was certainly stronger than anyone expected and reiterated that they will probably need to do further interest rate increases. The chairman also noted that he expects 2023 to be a year of 'significant declines' in inflation. "We may need to do more if we continue to get strong labour market or higher inflation reports," Powell concluded. During Powell's speech, the US Dollar Index moved up and down in a wide range but ended up closing the day modestly lower.

Meanwhile, US President Joe Biden said in his second State of the Union address that he proposes to quadruple the tax on corporate stock buybacks and called on Congress to pass his proposal for a billionaire minimum tax. Wall Street's main indexes showed no reaction to these comments and registered strong daily gains following the uninspiring start to the week.

During the Asian trading hours, Fitch Ratings announced that it revised 2023 Gross Domestic Product Growth for China to 5% from 4.1%. "We believe the economic recovery will be primarily consumption-led, as households re-engage in activities previously hampered by health controls," Fitch elaborated.

US stock index futures trade virtually unchanged early Wednesday and the benchmark 10-year US Treasury bond yield posts small daily losses at around 3.65%.

EUR/USD dropped to its lowest level since January 9 at 1.0667 on Tuesday but managed to close the day above 1.0700 with the US Dollar struggling to preserve its strength in the late American session. The pair trades marginally higher on the day early Wednesday but stays below 1.0750.

GBP/USD registered small daily gains on Tuesday and seems to have gone into a consolidation phase at around 1.2050 in the European morning on Wednesday.

USD/JPY lost more than 100 pips on Tuesday and has settled slightly above 131.00. Japanese Prime Minister (PM) Fumio Kishida said earlier in the day that they are in the process of choosing the next Bank of Japan (BoJ) Governor nominee.

Following Tuesday's rebound that was fueled by the Reserve Bank of Australia's (RBA) hawkish tone, AUD/USD stays relatively quiet below 0.7000 on Wednesday.

USD/CAD closed in negative territory on Tuesday and was last seen moving sideways slightly below 1.3400. Bank of Canada (BoC) Governor Tiff Macklem said earlier in the day that they need time to gauge how households, businesses adapting to higher rates before making further moves.

Gold price registered small gains on Tuesday as it struggled to gather recovery momentum. At the time of press, XAU/USD was flat on the day at around $1,875.

Bitcoin snapped a five-day losing streak and gained more than 2% on Tuesday. BTC/USD stays relatively quiet and trades near $23,200 early Wednesday. Ethereum rose 3.5% on Tuesday and erased the losses from Sunday and Monday. ETH/USD, however, failed to climb above $1,700 at its first attempt and was last seen trading flat on the day at $1,670.