How the US Dollar Survived Against Powell’s Warning

This article was published in English on 10.02.2021.

Kathy Lien, Managing Director of UK Asset Management Currency Strategy

Powell says no rate hike until maximum employment and 2% inflation

European Central Bank (ECB) President Lagarde states that inflation is not reaching the target

Intraday volatility in stock markets causes weakness in NZD and AUD

8-day oil rally losing momentum

It traded higher against most of the major currencies, appearing unaffected by weak inflation data and pigeon comments by Fed Chairman Jerome Powell. Some Fed heads spoke early on the cut, with stocks hitting record levels, Biden Administration making progress on incentives, and vaccinating more Americans.

Powell, however, cast doubt on this scenario, saying that the Fed will not tighten policy in response to strong labor data, as a strong labor market is still far away. He even called for interest rates to remain below zero until the economy reaches maximum employment and inflation hits 2%. The economy fell to a very low base during the epidemic, millions of Americans are unemployed, and Powell wants to ensure a solid recovery.

Although this month saw a one-year high, inflation is still weak, according to its report. Core inflation rose 0.3% in January, but the core rate remained unchanged. Even as prices rise in the coming months, Powell said that “it won’t make much sense”. Statements like this should make the US dollar fall, but the US dollar strengthened against most of the major currencies in the New York session.

ECB Administrator Christine Lagarde does not see rising inflation as a concern either. In a speech today, Lagarde said that inflation is not approaching the medium-term ECB target. This indicates that he wants to keep the policy expansionary. This is a more dovish statement than the ECB commented last month that there may be no need to fully utilize PEPP if financial conditions are favorable. it declined and traded heavily for most of the New York session.

The best performing currency today is the pound. Bank of England (BoE) Administrator Andrew Bailey chose not to mention monetary policy in his speech and instead chose to encourage the EU to give market access to the financial services industry for securities exchange. has outperformed the euro since the start of the year and continues to do so as the country moves forward in vaccination.

and the dollars were the weakest currencies on Wednesday. They are particularly vulnerable to stock market volatility and US dollar rally as high beta currencies, though not an economic report from commodity producing countries.

He took a quick trip to the negative zone one hour before starting the day 100 points high and entering the positive zone. climbed to over 1.27 as the eight-day rally in oil subsided.

Looking ahead, China’s Lunar New Year may reduce market participation. The economic calendar is weak; only US jobless claims and Australia have consumer inflation expectations.

Original (English) Text for Kathy Lien’s free Trading report

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