European session review: USD appreciates ahead of Fed Chair Powell's testimony

USD rose against its major counterparts in the European session on Tuesday, as investors awaited the Federal Reserve chairman Jerome Powell’s testimony to the U.S. Congress regarding the central bank’s response to the coronavirus pandemic (due at 18:00 GMT). Investors hope to get further guidance on the Fed's recent hawkish shift in policy outlook.

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, increased 0.16% to 92.05.

In his prepared remarks for Congressional hearings, Powell noted that the U.S. economy has shown “sustained improvement”, supported by widespread vaccinations and unprecedented monetary and fiscal policy actions, and reiterated his view that inflation pressures, which have “increased notably in recent months”, will drop back toward the Fed’s longer-run goal once “transitory supply effects abate”. He also said that “indicators of economic activity and employment have continued to strengthen, and real GDP this year appears to be on track to post its fastest rate of increase in decades”. Powell, however, added that the pandemic continues to pose risks to the economic outlook and pledged that “the Fed will do everything we can to support the economy for as long as it takes to complete the recovery”.