Forex Today: US Dollar on the back foot ahead of Fed Chairman Powell

What you need to know on Tuesday,  June 20:

The week started in slow motion amid a scarce macroeconomic calendar, and US markets closed due to the celebration of the Juneteenth Holiday. The American Dollar corrected part of the previous week's massive losses but remains on the back foot.

United States Secretary of State Antony Blinken met Chinese President Xi Jinping over the weekend, announcing on Monday they made "good progress" in talks meant to stabilize the relationship between the two countries but failed to produce any major breakthrough.

On Monday, ECB's Member of the Executive Board Philip R. Lane said another hike in July seems appropriate, while September's decision will depend on data. He sounded confident, saying inflation would come down fairly quickly to the central bank's 2% target. Meanwhile, another ECB Member of the Executive Board, Isabel Schnabel,  expressed concerns about the central bank underestimating inflation, adding the interest rate path should have been steeper. EUR/USD ended the day around 1.0920.

GBP/USD hovers around 1.2780, not far from the 2023 high posted last week at 1.2848, as investors expect the Bank of England (BoE) to hike its benchmark rate by 25 basis points later this week while leaving the door open for additional hikes. UK interest rate swaps show a greater than 50% chance of BoE rates reaching a terminal rate of 6% by February 2024.

The Reserve Bank of Australia (RBA)  will release the Minutes of its latest meeting early on Tuesday. Australian policymakers unexpectedly hiked the cash rate by 25 basis points (bps) for a second consecutive month, as policymakers noted  services inflation remains "too high." The Minutes are expected to confirm policymakers' hawkish bias, with investors looking for clues about a potential terminal rate. The People's Bank of China (PBoC) will announce its Interest Decision. AUD/USD heads into the events trading around 0.6850.

XAU/USD remains stable around $1,950 a troy ounce, while USD/JPY pressures the 142.00 region.

Later this week, Federal Reserve Chairman Jerome Powell will testify before Congress. Financial markets hope for additional clues on the future of monetary policy.