US Dollar Sees Some Weakness From Powell’s Dovish Tones
Early on Thursday, the US dollar is experiencing a bit of a pullback after several sessions of trading strong after Fed Chair Jerome Powell reaffirmed his dovish plans at the congressional testimony in the previous session. At the time of writing, the US dollar index DXY is trading around 92.55.
In his first day of testimony before Congress, Powell maintained that the spike in inflation was driven by pent-up demand as the economic reopens and need not require a knee-jerk reaction to implement tapering of bond purchases. He went on to state that he was in no hurry to start tightening the monetary policy, playing down the hawkish tones from the latest Fed policy meeting.
The greenback dipped after rising to the highest level seen in three months against the common currency while the USD/JPY also slipped after touching a one-week high earlier. The Canadian dollar received a boost in the previous session after the BOC tapered its bond purchase program by one-third at its policy meeting and revised its inflation outlook higher.
However, the safe haven appeal of the US dollar lends its some support and limits losses amid rising uncertainties about global economic recovery in the wake of the latest resurgence of COVID-19 infections around the world due to the highly contagious delta variant. Meanwhile, investors remain unconvinced about Powell’s insistence of extending the dovish outlook even as they admit that the future outlook still remains uncertain for the US economy as well even though it is recovering well as the moment.
The dovish remarks from Powell drove weakness in the dollar which had been supported by rising expectations of the central bank tapering stimulus efforts and implementing rate hikes sooner than previously planned. Later today, the focus shifts to the weekly jobless claims from the US.
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