Dovish Fed Keeps Driving the Dollar Down

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freemexy

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Traders expecting Wednesday‘s FOMC meeting to reverse the dollar’s fortunes, received a rude awakening as a dovish policy statement
continued to heap pressure on the USD.To get more news about WikiFX, you can visit wikifx official website.

With the economy showing little sign of recovery from the devastating
Covid-19 driven recession that we currently find ourselves within, the
Fed left interest rates at near zero levels and vowed to continue
“acting as appropriate to support the economy.”

Jerome Powell also implored Congress to help stimulate the economy
through supportive fiscal policy, but the ultrasensitive and divided US
political landscape certainly doesnt help.

There‘s no way today’s FOMC statement can be viewed any way but as a
dovish message to markets, with the Feds intention to maintain highly
accommodative policy for “as long as it takes.”


Most likely were talking years here.

The actual July FOMC statement was little changed from June, but did
feature the following addition: “The path of the economy will depend
significantly on the course of the virus.”

The irony of the Fed speaking about there being no tradeoff between
the US economy and public health on the same day that the countrys
Covid-19 death toll ticked above 150,000, is not lost on me.

A devastating milestone that looks nowhere near a top, with
California, Texas and Florida all also reporting record numbers of daily
deaths.

“Even if the reopening goes well and many, many people go back to
work, it is still going to take a fairly long time for parts of the
economy that involve lots of people getting together in close proximity”
said Powell in his accompanying, socially distanced, virtual press
conference.With markets becoming increasingly addicted to stimulus, we
know support means free money and as you can see below, the markets
reacted accordingly.

The US Dollar Index (DXY) remains under pressure, reaching support not tested since 2018.

Posted 02 Sep 2020

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