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Dollar declines on Powell’s comments

The greenback is under pressure as the Federal Reserve considers whether or not to introduce further interest rate increases and at what pace.

Dollar to decline on Powell’s comments

Jerome Powell said last Friday, 4 January the Fed “wouldn’t hesitate” to change the path of interest rate rises if needed, suggesting the central bank would be “patient” when it comes to deciding whether or not to press ahead with additional rises.

The Federal Reserve chair’s comments boosted stock markets but weakened the Dollar against a basket of peer currencies, causing the US currency to sell off, with GBP/USD ending the week above 1.2740 and EUR/USD trading above 1.1410.

Financial markets are also optimistic about trade talks between the US and China.

The two-day negotiations taking place in Beijing are the first face-to-face meeting since US President Donald Trump and his Chinese counterpart Xi Jinping agreed a 90-day truce last December after Trump pledged to increase tariffs on $200 billion’s worth of Chinese imports from 10 per cent to 25 per cent – something Beijing is hoping to avoid. The two sides have until 1 March to agree a deal.

Meanwhile, a survey by the manufacturers trade body EEF and the global insurer AIG has found that 72 per cent of UK manufacturers stated Brexit as their biggest source of uncertainty. The survey, which covered 242 companies, has also revealed that more than four-fifths of those surveyed (81 per cent) said exchange-rate volatility posed a risk to their business plans if the UK leaves the Eurozone without a deal.

UK Members of Parliament return from the Christmas recess today to continue the debate on Prime Minister Theresa May’s Brexit withdrawal agreement, with the meaningful vote scheduled for Tuesday, 15 January.

Credit: Photographer Andrew Harrer (Bloomberg).


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