Forex traders seem to have forgone the dollar judging by results from early trading in Europe on Wednesday. As such, the currency saw a small drop in overall value. One of the primary forces behind the drop was Jerome Powell, the Federal Reserve Chairman, who had quite a dovish stance regarding the economy. Mr. Powell made his stance public in his semi-annual hearing in front of the US Congress.
The drop was most noticeable when looking at the Dollar Index. The Index tracks the currency against six others, showing precise results. At 3:55 ET, it showed that the dollar is 0.1% down, sitting at 90.058. This translated to a EUR/USD rise of 0.1%, USD/JPY jump of 0.3%, and an increase of the AUD/USD value by 0.1%. The last pair’s rise was the most significant, as it closes in on its three-year high at 0.7920.
The aforementioned Powell released his testimony on Tuesday, reaffirming that US interest rates will stay low. The central bank plans to keep purchasing bonds to prop up the US economy. That’s to counteract the negative impact of President Joe Biden’s new COVID-19 aid package. The package’s total comes up to 1.9 trillion USD.
Powell emphasizes that the economy is quite far off its goals for inflation and employment. However, such changes are gradual and require time if they are to make substantial progress. Despite the optimism, some consider the policies to damage the dollar’s value in the long run. Powell will continue his testimony later on Wednesday.
NZD/USD pair shows strong performance
Globally, economies hope for a quick recovery as vaccines roll out and lockdowns weaken. As a result, the value of the currencies from countries that were quickest to recover show strong performance. NZD/USD is an example of that, jumping by 0.5% to 0.7373, which is its three-year high. New Zealand’s Reserve Bank had minimal influence on the jump, maintaining interest rates at 0.25%. The Bank estimates that the risks for the economy in the future weren’t non-existent but remain balanced.
Due to its excellent treatment of the pandemic, New Zealand has earned much praise. That comes from both politicians and various rating agencies, such as Standard & Poor. Namely, the agency boosted the country’s rank to AA+ due to its pandemic recovery and expected economic rejuvenation.
Another winner in this regard seems to be the UK. Namely, the country’s Prime Minister, Boris Johnson, revealed his plan to ease the current restrictions. Its rapid vaccine rollout is to thank for that, as the UK maintains the highest vaccination rate in Europe. The GBP reacted positively to the announcement, with GBP/USD rates up by 0.5%.