Powell’s first testimony: will the dollar finally rise?

Last week the greenback could strengthen its position a little bit. However, since yesterday the US dollar was weakening against most major currencies because of the expectations of the today Jerome Powell’s first testimony to the Congress as Fed Chair. Traders were waiting if the new chairman will continue the monetary policy of his predecessor Janet Yellen or his policy will be more hawkish.

Let’s look at the main ideas of Powell’s testimony and will try to forecast its impact on the US dollar’s future.

As expected, Powell’s speech was hawkish. In his testimony Mr. Powell gave positive comments about the labour market, said that financial conditions are accommodative in spite of volatility, export is firm, fiscal policy is more stimulative. At the same time, he mentioned that inflation is still below 2% objective. As a conclusion, the chairman said that the Fed is aimed at the further gradual increases in the federal funds rate. It led to the rise of the US dollar.

However, the new chairman did not give clear clues on the amount of the future rate hikes. Furthermore, he did not mention the last important events that happened in the US economic world such as stock market selloff and an increase of the US Treasury yields. So the speech was superficial.

It creates doubts about the term of the dollar’s increase. First of all, Jerome Powell did not mention the number of rate hikes. Secondly, his testimony was not more hawkish than expected. Thirdly, the Fed is anticipated to raise the interest rate next month, so it is questionable that the traders will overvalue the increase. More likely they will look for further rate hikes. And the last but not least, the greenback is affected by a lot of factors: political and economic, so they will have a huge influence as well. 

Making a conclusion we can say that the speech of Mr. Powell was expectedly optimistic. However, he did not risk, so did not give any additional comments about the rate hikes. “Further gradual increases” let the dollar recover after this week fall, however, it is still under pressure. More clues on the future monetary policy we can get during Powell’s testifies on Thursday, March 1 at 17:00 MT time.

Similar

09.05.2023 12:53 Oil Market Outlook

Oil prices rebounded slightly on Friday but are still expected to show losses for the week due to concerns about slowing growth in the US and China. US crude futures rose 2.7% to $70.41 per barrel, while the Brent contract increased by 2.5% to $74.33 per barrel.

03.04.2023 15:05 China’s rebound and energy prices

China's economy is rocketing. On the other hand OPEC+ countries take the decision to cut the production. What will be the impact on the oil price?

05.08.2022 16:28 What Can Drive Oil below $90 a Barrel?

The past two years have seen the biggest swings in oil prices in 14 years, which have baffled markets, investors, and traders due to geopolitical tensions and the shift towards clean energy.

Latest news

24.05.2023 14:14 Gold’s Next Move Could Be Huge!

Let's dive into the world of gold. Currently, the price of gold, represented by XAUUSD, is stuck in indecision, hovering around the $1,975 mark. The market is anxiously awaiting two important factors: the release of the Federal Reserve's meeting minutes and the extension of the US debt ceiling.

24.05.2023 12:16 What to Trade in June

Hey guys, this is the last full trading week in May, and many forward-looking individuals like myself are already preparing themselves to seize whatever opportunities June may have in store. On this note, I will review a few commodities that have satisfied my quest for swing-trading opportunities in the coming month. Follow me!

23.05.2023 09:15 Will GBP Recover Now?

The Bank of England (BoE) has dramatically shifted its economic forecasts. They no longer expect a recession in the UK and have upgraded their growth projections. This year, the BoE predicts GDP growth of +0.25%, a significant improvement from previous expectations. Next year's forecast is even more optimistic, with a projected growth of 0.75%.