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U.S. Dollar Soars On Powell’s Renomination As Fed Chair

By Kathy LienForexNov 22, 2021 06:24PM ET
www.investing.com/analysis/us-dollar-soars-on-powells-renomination-as-fed-chair-200609181
U.S. Dollar Soars On Powell’s Renomination As Fed Chair
By Kathy Lien   |  Nov 22, 2021 06:24PM ET
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The U.S. dollar soared against all of the major currencies after President Joe Biden officially renominated Jerome Powell as Federal Reserve chairman. Dr. Lael Brainard, the only other realistic candidate, will become vice-chairman when Richard Clarida’s term ends in January. When it comes to central bankers, investors generally prefer continuity, which explains why the U.S. dollar shot instantly higher when Biden’s announcement was made. After months of uncertainty, investors see today’s decision as a green light for further policy normalization. At the beginning of November, the Fed said it will begin to taper asset purchases, but over the past week, a growing chorus of central bankers are calling for faster taper or rapid removal of accommodation, including Vice-Chair Clarida, Governor Christopher J. Waller and Fed President James Bullard.
 
Demand for U.S. dollars should be healthy this week, with the PCE deflator and FOMC minutes scheduled for release on Wednesday. When the Fed made its taper announcement, it was looking for continued gains in economic activity and employment. It also acknowledged that price pressures have been more rapid and enduring than anticipated, but it still insisted that these factors are transitory. The market will make its own judgement about inflation when the PCE deflator is released. Core PCE is the Fed’s preferred measure of price pressure, and it is widely expected to show prices ticking higher. With the FOMC minutes coming after PCE, investors are likely to focus on the central bank’s economic outlook. 
 
USD/JPY flirted with 115, while EUR/USD dropped to fresh 16-month lows after Biden’s announcement. With Biden’s comments on the economy expected to be mostly positive and U.S. Markit PMIs to edge higher after stronger Empire State and Philadelphia Fed surveys, further gains are likely for the greenback.
 
This is also a big week for the New Zealand dollar, which dropped to one-month lows against the greenback. The Reserve Bank of New Zealand is widely expected to raise interest rates for the second time in row, with some economists calling for an aggressive 50bp of tightening. COVID-19 cases are very high, but strong inflation, employment and generally good data are some of the many reasons why policy normalization is expected. With that said, third quarter retail sales numbers are due for release this afternoon, and consumption may have been curbed by lockdowns in August and September. 
 
The euro and sterling will be in focus tomorrow, with Eurozone and UK PMIs scheduled for release tomorrow. Eurozone data is likely to be weaker given the recent surge in COVID-19 cases. Data has also been mixed, indicating a peak in the pandemic recovery. If that’s true, EUR/USD could slide as far down as 1.12. UK data could be better after relatively healthy retail sales and labor market figures.
 
U.S. Dollar Soars On Powell’s Renomination As Fed Chair
 

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U.S. Dollar Soars On Powell’s Renomination As Fed Chair

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Comments (10)
Jayantibhai Patel
Jayantibhai Patel Nov 24, 2021 6:11AM ET
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Thanks
Ali HAMDI
Ali HAMDI Nov 23, 2021 6:07PM ET
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Thank you very much kathy !
Domenic Georgio
Domenic Georgio Nov 23, 2021 8:54AM ET
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Good article. To the point on all
DrFunkenstein hayson
DrFunkenstein hayson Nov 22, 2021 8:32PM ET
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what a circus act. it means nothing. they can never raise rates again. what don't people understand? the fed is done, the game is over
Gayle Williams
Gayle Williams Nov 22, 2021 7:39PM ET
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yes, and its a good thing. a strengthening is very hard on other countries who need dollars to do business. especially in a slowing global economy.
Manish Bhattarai
Manish Bhattarai Nov 22, 2021 7:34PM ET
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great article kathy
Michael Jajkowski
Michael Jajkowski Nov 22, 2021 7:08PM ET
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The best news I’ve had in a long time. Thank goodness!!
DrFunkenstein hayson
DrFunkenstein hayson Nov 22, 2021 7:01PM ET
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what a circus act. it means nothing. they can never raise rates again. what don't people understand? the fed is done, the game is over
فتحى محمد فتحى مدين
فتحى محمد فتحى مدين Nov 22, 2021 6:51PM ET
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Thanks for good news
Legandary Mafia
Legandary Mafia Nov 22, 2021 6:33PM ET
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But they are deleting your posts after this I don't understand
 
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