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Are U.S. Dollar’s Post-FOMC Gains Sustainable?

By Kathy LienForexJun 16, 2021 05:21PM ET
www.investing.com/analysis/are-us-dollars-postfomc-gains-sustainable-200586576
Are U.S. Dollar’s Post-FOMC Gains Sustainable?
By Kathy Lien   |  Jun 16, 2021 05:21PM ET
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Investors drove the U.S. dollar sharply higher on Wednesday after the Federal Reserve signalled an earlier interest rate hike. Thirteen out of 18 policy-makers now see as many as two rate hikes by the end of 2023. In March, only seven members saw a move in 2023, with the majority looking for rates to remain unchanged into 2024. This dramatic shift in expectations was motivated by stronger-than-expected growth and inflation. The improvements in the U.S. economy have clearly convinced policy-makers that “inflation could turn out to be higher and more persistent than we expect,” according to Federal Reserve Chairman Jerome Powell. Growth and inflation forecasts were raised for 2021 and 2023. The most dramatic change was in their estimates for core PCE, which was raised by a full percentage point to 3.4% for 2021.

Powell’s tone at the press conference was undeniably optimistic. He said indicators of activity and employment continue to improve, with the factors weighing on employment growth expected to wane in the coming months. He took time to downplay the slow improvements in the labor market, saying that it is clear we’re on a path to a very strong labor market one to two years out. As a result, “many participants are more comfortable” with the idea that “economic conditions” in their “forward guidance will be met somewhat sooner than previously anticipated.”

Powell even addressed taper. The Fed chair admitted that officials have begun “talking about talking about” slowing bond purchases even though tapering won’t happen until they “feel the economy has reached substantial progress.” “They’ll be able to say more about timing when they see” the data. Ten-year Treasury yields jumped 5%, reinforcing the rally in the U.S. dollar.

The question now is whether the U.S. dollar’s gains are sustainable. Given how long investors have been waiting for the central bank to talk taper and how uncertain it was as to whether it would happen today, we see further gains in the U.S. dollar. The Fed’s optimism is a reflection of its belief that economic data will continue to improve in the coming months. The Swiss Franc was hit the hardest by the rally in the U.S. dollar followed by the euro. The European Central Bank avoided taper talk at its last meeting and that decision weighed heavily on EUR/USD’s performance on Wednesday. The Swiss National Bank meets tomorrow and, like the ECB, no consequential changes are expected.

Next to the Japanese Yen, the currency that resisted the U.S. dollar’s rise the most was sterling. Inflation in the UK rose more than expected in the month of May, as the year-over-year CPI rate hit 2.1%. The Australian and New Zealand dollars come into focus tonight, with Q1 GDP due from New Zealand and labor market numbers expected from Australia. Both reports are expected to be strong, which should ease some of AUD and NZD’s losses.

Are U.S. Dollar’s Post-FOMC Gains Sustainable?
 

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Are U.S. Dollar’s Post-FOMC Gains Sustainable?

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Comments (23)
Mr PA
Mr PA Jun 18, 2021 10:43AM ET
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I hate you so much
Mr PA
Mr PA Jun 18, 2021 10:08AM ET
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I've lost half my account listening to your "advice".............. I'm so hurt
Mr PA
Mr PA Jun 18, 2021 3:14AM ET
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I would of doubled my account if it werent for you!!!
Mr PA
Mr PA Jun 18, 2021 1:30AM ET
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its not stopping! you were dead wrong! so much money lost- i hate you!
Klaus Weyers
Klaus Weyers Jun 17, 2021 8:20PM ET
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Mr pa.. only Listen to yourself
Mr PA
Mr PA Jun 17, 2021 10:19AM ET
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You cost me so much money! It did NOT do wut you said AT ALL
Charles Ngari
Charles Ngari Jun 17, 2021 10:19AM ET
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why do you say she cost you. It was your decision. Again she never said one should trade her articles.
Thomas Read
Thomas Read Jun 17, 2021 7:52AM ET
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excellent call on the dollar
Mr PA
Mr PA Jun 17, 2021 4:57AM ET
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God, y did I listen to you...I lost so much...I was in a beautiful short position until I read ur articles...i hate you
Mr PA
Mr PA Jun 17, 2021 4:50AM ET
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You were wrong and it cost me alot of money. I'm very angry. I wish I never read your article.
John Smit
John Smit Jun 17, 2021 4:50AM ET
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Do your own research.
Mohammad Mohammadi
Mohammad Mohammadi Jun 17, 2021 3:08AM ET
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Thank you. The conclusion I got from your talk was that the dollar is currently bullish. In which currency pair can you enter tonight for aud, nzd, and will they bullish? Thankful
Sean Livingstone
Sean Livingstone Jun 17, 2021 1:27AM ET
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Done in a day.. That's all it has.
Ioannis Lazaridis
Ioannis Lazaridis Jun 16, 2021 11:10PM ET
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So, if FED's belief that economic data will continue to improve in the coming months won't be true then USD will weaken.
Joel Schwartz
Joel Schwartz Jun 16, 2021 10:35PM ET
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Pull up a chart of the value of USD since 1913. We haven’t had real deflation since the Great Depression. The FED printed 30% more USD in the last year alone and now can’t lower interest rates further. The only direction for the dollar is up, especially with all of these real and valid inflation fears.
Chris Black
ChrisBlackforex Jun 16, 2021 10:29PM ET
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Thanks to you knowledge is power! 189 pips lll can kiss you
Steve Siew
Steve Siew Jun 16, 2021 10:27PM ET
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The Fed is boxed in a liquidity trap.
William Bailey
William Bailey Jun 16, 2021 8:35PM ET
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Get used to it ! Scamming Fed is done and financial repression at an end! Time is here to pay credit off and limited liquidity …. Time for over-priced assets to fall!!!!!
Miguel Massens
Miguel Massens Jun 16, 2021 8:29PM ET
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gap fill around 93 and then 📉
R T HUDGINS
R T HUDGINS Jun 16, 2021 6:55PM ET
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No It is Not
Chris Poulos
Chris Poulos Jun 16, 2021 6:35PM ET
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you do understand that when the fed keeps interest rates low it means that the interest on the enormous US debt is greatly reduced. nobody seems interested in a balanced budget anymore so you can expect that the fed will keep interest rates very low forever. right now people are excited because the fed is TALKING about MAYBE raising rates A HALF percent in a few YEARS! wow.
Chudhary Waqas
Chudhary Waqas Jun 16, 2021 6:35PM ET
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so what this effect in stock ?
Irpan Supiandi
Irpan Supiandi Jun 16, 2021 6:35PM ET
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so it should be bullish still have more times until Fed really taper and raise their rates...?
Joel Schwartz
Joel Schwartz Jun 16, 2021 6:35PM ET
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If you know the size of the US national debt, you know that even a 0.5% rise is astronomical.
Ioannis Lazaridis
Ioannis Lazaridis Jun 16, 2021 6:35PM ET
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Joel Schwartz : Negative for a few days because of sentiment and not because of materialistic changes. After few days , stocks up and business as usual until 2023.
Ioannis Lazaridis
Ioannis Lazaridis Jun 16, 2021 6:35PM ET
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Joel Schwartz : 100% correct !
Farrux Zafarov
Farrux Zafarov Jun 16, 2021 6:07PM ET
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Salom
Manish Jain
Manish Jain Jun 16, 2021 6:03PM ET
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thx Kathy for real report of a reel show
Joe Dav
Joe Dav Jun 16, 2021 6:03PM ET
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Hello, you know much about trading here
Charles Ngari
Charles Ngari Jun 16, 2021 6:03PM ET
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Joe Dav yes I do
Sol Wein
Sol Wein Jun 16, 2021 6:00PM ET
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Fade the dollar!
Legandary Mafia
Legandary Mafia Jun 16, 2021 5:47PM ET
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I love you Kathy your indeed the best
 
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