Powell Helps US Dollar Against Rivals
The dollar strengthened on Tuesday as Federal Reserve Chairman Jerome Powell gave an upbeat assessment of the US economy while undermining the impact of current global trade policy on the prospects of further monetary tightening.
Investors are watching Powell’s comments on global trade for clues as to whether the issue could slow the rate of Fed rate hikes. When Powell turned out to ignore the issue of global trade, analysts said it was a green light to back up the US dollar.
Powell said in remarks delivered before the US Senate Banking Committee that it would be difficult to predict how trade policy negotiations could impact the US economy. He also said the country’s economy is at its highest peak in recent years where labor markets remain strong and inflation remains around the Fed’s 2 percent target.
Richard Franulovich, head of forex strategy at Westpac Banking Corp. in New York, believes that none of the dovish things Powell delivered. He said conditions are still solid and Powell is quite optimistic on the economic outlook. His global picture presented solidly as he outlines a long list of reasons why the market should expect about solid economic growth.
As a result, on Tuesday the US dollar surged against the yen, rising to 112.90 yen and on Wednesday morning still moving up to its highest level while the news was written at 113.06 yen.
Against the euro, the US dollar also strengthened so the currency pair EURUSD fell to $ 1.1649 and closed negative at $ 1.1660.
Pound sterling also received a severe blow from the US dollar, falling from $ 1.3269 to $ 1.3069 and closing negatively at $ 1.3115. In addition to the average income data of British workers under previous period data, the new challenge facing Prime Minister Theresa May from the parliament over Brexit is also a burden for the unity of the four kingdoms.
Today market participants will still monitor Powell’s testimony in the US Congress in addition to regular economic data such as UK inflation data, European inflation, building permit data and housing builds in the US.