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The US dollar sharply fell on Tuesday, following remarks by US Fed Chair Jerome Powell. In the hearing before the Senate on the occasion of his re-nomination for a second term, the US central bank Chief mixed hawkish view of the economy with watchful approach to the federal balance sheet cut.
Economic Data
The North American trading session saved most important data for Wednesday for the CPI figures, with no significant data released on Tuesday
Other Developments:
Powell noted that the US economy is growing at its fastest rate in years, while the labour market is “robust.” He said the Fed has planned to contain hot inflation, cooling down the market’s concerns.
At the same time, Powell said that the balance sheet runoff could happen “perhaps later in the year,” cooling expectations for an aggressive tapering.
Wall Street advanced on relief, with the three major indexes holding on to gains ahead of the close. US government bond yields eased as the yield on the 10-year Treasury note retreated to 1.75%.
The EUR/USD pair advanced to 1.1374, holding nearby as the day comes to an end, while GBP/USD trades at 1.3625, its highest since November.
Safe-haven currencies advanced modestly against the greenback, with USD/JPY now trading at 115.40. Commodity-linked currencies strengthened, with AUD/USD trading at 0.7210 and USD/CAD down to 1.2570.
Gold is up to $1,820 a troy ounce, while crude oil prices also got a boost from a weaker dollar, with WTI currently trading at $81.40 a barrel.
The focus now shifts to US inflation figures. The country will publish on Wednesday the December Consumer Price Index, foreseen at 7% YoY.
US Fed Vice-Chair Richard Clarida stepped down on Monday after failing to report stocks’ trading just a few days before the Fed announced emergency financial measures to shore up markets in the middle of the coronavirus pandemic. Fed vice-chair said his failure to report those trades was the result of “inadvertent errors”.
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