How well did Powell pitch the dollar last week? –Alton Drew – News Block

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What the data shows…

EUR/USD rose three pips in the last 24 hours according to data from OANDA and x-rates.com.

GBP/USD showed a five pip increase according to x-rates.com, but OANDA data showed a seven pip decline in the cable rate.

The AUD/USD showed, in my opinion, a big rise in price with a rise of forty pips, according to x-rates.com. OANDA reflected a minor increase of nine pips.

According to data from x-rates.com, the NZD/USD rose fifty pips, while OANDA data reflects a twelve-pip rise in the Kiwi dollar.

There was a 37-pip decline in the USD/CHF, according to data from x-rates.com, while OANDA data reflected a 10-pip increase in the rate.

Another notable price change was the decline in USD/JPY. X-rates.com data reflects a price drop of 5,373 pips. OANDA reported a 3155 pips drop in the USD/JPY.

So, over the past twenty-four periods, I must ask if the Federal Reserve, arguably the most important of the world’s central banks because of the dollar’s reserve currency status, may have said anything that would cause traders to question their faith in the dollar. .

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Is Powell selling the dollar well?

It is a holiday in the United States so the Federal Reserve System is closed. This means there is a reduced likelihood that the narrative about the state of the US dollar will seep into consciousness. The last sales pitch on the dollar occurred last week by the president of the Federal Reserve System, Jerome Powell, during the statements made at the Fourth Conference on Financial Stability of the Bank of Spain.

Mr. Powell assured the audience that the US banking system is sound and while economic activity took a significant hit in 2022, the economy in 2023 is growing moderately.

On the labor market front, the Federal Reserve is seeing an easing in nominal wage growth, and while unemployment has risen, it is still historically low.

Inflation is still above the Federal Reserve’s two percent inflation target. Powell cited data from the US Bureau of Economic Analysis that showed the core prices of the personal consumption expenditures index rose 4.7% year-over-year.

And those inflationary pressures are exacerbated by rising interest rates that move through the credit markets. The interest rate increases are being helped by increases over the past 16 months in the federal fund target rate range now at 5.00% to 5.25%.

While Mr. Powell did not speak directly about demand for the dollar, I can see why some traders would be spooked by Mr. Powell’s assessment of the economy and the impact of the economy on demand for the dollar. Higher interest rates and yields may entice traders into dollar-denominated instruments, but inflation can erode purchasing power.

I’ll give Powell credit for this. His tone, at least in this speech, was quite balanced and transparent. He couldn’t put on much of a happy face in markets that consumers are finding increasingly painful.

alton drew

July 4, 2023

Disclaimer: This publication should not be construed as financial, investment, or legal advice. Contact your financial or legal advisor.