Powell’s speech sends USD higher

Jerome Powell, the Chairman of the Federal Reserve, was scheduled to deliver a speech at 5:30 pm BST. Topic of the speech concerns economic outlook and monetary policy therefore it was expected to draw markets’ attention. Apart from that, it was also the last chance to hear from US central bankers before the blackout period preceding every meeting begins this weekend.

Highlights from the speech:

  • Strong multilateral relationships are essential

  • Fed is committed to non-political decision making

  • There are significant risks to the economic outlook

  • Outlook hints at moderate growth and strong labour market

  • Economy is in a good place

  • Trade continues to weigh on business investments

  • Fed will act in a manner to sustain economic expansion

  • Consumer spending fuels US economy and consumer is in a good shape

  • Fed does not expect a recession

  • Central banks will have less room to stimulate the economy in a new landscape with lower growth, lower inflation and lower rates

  • Central banks will have less ability to counteract economic downturn by lowering rates

  • Fed should not let inflation fall too much below the target

  • QE is not a perfect substitute for interest rate adjustments

  • Powell denies that politics have any impact on Fed’s decisions

EURUSD moved lower over the course of Powell’s speech. One should note that the whole move is not major as the main currency pair moved around 0.2%. However, remarks on low likelihood of recession caused quite a major pullback on the gold market. Source: xStation5

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