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Why U.S. Dollar Was Undaunted By Powell’s Warning

By Kathy LienForexFeb 10, 2021 05:02PM ET
www.investing.com/analysis/why-us-dollar-was-undaunted-by-powells-warning-200559935
Why U.S. Dollar Was Undaunted By Powell’s Warning
By Kathy Lien   |  Feb 10, 2021 05:02PM ET
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·      Powell Says No Rate Hikes Until Max Employment and 2% Inflation
·      Euro ECB President Lagarde Says Inflation Not Meeting Goal
·      Intraday Volatility in Stocks Leads to Weakness in NZD and AUD
·      8-Day Oil Rally Loses Momentum
 
The U.S. dollar traded higher against most of the major currencies, seemingly unfazed by weaker inflation data and dovish comments from Fed Chairman Jerome Powell. With stocks hitting record highs, the Biden Administration making progress finalizing the stimulus deal and more Americans getting vaccinated, some Fed presidents have been talking about earlier tapering. 
 
However, Powell casted doubt on this scenario by saying that the Fed will not tighten policy in response to strong labor data because a strong labor market is still very far away. In fact, he calls for rates to remain at the current near-zero level until the economy reaches maximum employment and inflation hits 2%. The economy dropped to a very low base during the pandemic, millions of Americans are unemployed and Powell wants to ensure a durable recovery. 
 
Oil prices hit a one-year high this month, but inflation remains subdued, according to the CPI report. Headline inflation rose 0.3% in January but the core rate was unchanged. Even if prices rise in the coming months, Powell said “it isn’t going to mean much.” Comments like this should have driven the U.S. dollar lower, but the greenback strengthened against most of the major currencies in the New York trading session. 
 
European Central Bank Governor Christine Lagarde doesn’t see rising inflation as a concern either. In a speech today, she said inflation is not converging to the ECB goal over the medium term, which signals that she’d like to keep policy accommodative. This is more dovish than comments last month, when the ECB suggested that it may not need to use the full PEPP envelope if financing conditions remained favorable. The euro came off its earlier highs and traded heavy for most of the New York session. 
 
The best performing currency today was sterling. Bank of England Governor Andrew Bailey did not touch on monetary policy in his speech, choosing instead to urge the European Union to grant the financial services industry market access for securities clearing. GBP has outperformed euro since the beginning of the year and continues to do so as the country forges forward with vaccination.
 
The New Zealand and Australian dollars were the weakest currencies on Wednesday. No economic reports were released from the commodity-producing countries, but as high-beta currencies, they are particularly vulnerable to stock market volatility and U.S. dollar rally. 
 
The Dow Jones Industrial Average went on quite a rollercoaster ride, starting the day up more than 100 points at record highs only to turn negative an hour later before recovering back into positive territory. USD/CAD climbed above 1.27 as the eight-day-long rally in oil moderated.
 
Looking ahead, the Chinese Lunar New Year should reduce participation in the market. The economic calendar is light with only U.S. jobless claims and Australian consumer inflation expectations scheduled for release. 
Why U.S. Dollar Was Undaunted By Powell’s Warning
 

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Why U.S. Dollar Was Undaunted By Powell’s Warning

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Comments (19)
Mr Mkhize mkhize
Mr Mkhize mkhize Feb 15, 2021 1:57PM ET
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another point,
Soroush Moradi
Soroush Moradi Feb 11, 2021 2:16AM ET
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finally i don't understand what happen to dollar, is it become weak or strengh !?!
Chris Black
ChrisBlackforex Feb 11, 2021 12:37AM ET
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Darryl That if you want to work at walmart or burgerking for $9.50 Sure yeah Lot of Jobs
Ursa Minor
Ursa Minor Feb 11, 2021 12:37AM ET
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sure, you looked it up on firexlive
Dan Br
Dan Br Feb 11, 2021 12:37AM ET
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Actually there are 1.4 million jobs avaiable in construction/skilled trades, for carperters, electricians, welders, plumbers, etc; starting wages for laborer/apprentice around $20 an hour; journeyman $40 an hour+. These used to be considered noble careers...
Darryl Allen
Darryl Allen Feb 11, 2021 12:37AM ET
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I'd rather work at walmart than sit around waiting for DC to take care of me
Darryl Allen
Darryl Allen Feb 10, 2021 11:10PM ET
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why is there another stimulus when there are 6,600,000 open jobs?
Pedro Morais
Pedro Morais Feb 10, 2021 11:10PM ET
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Darryl what do you do for a living?
Darryl Allen
Darryl Allen Feb 10, 2021 11:10PM ET
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WORK. What a concept!
Drupal Grupal
Drupal Grupal Feb 10, 2021 11:02PM ET
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and they say the murphy from Murphy's law was an optimist
Cook and Travel With sandun
Cook and Travel With sandun Feb 10, 2021 11:00PM ET
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Murali Brahmandam
Murali Brahmandam Feb 10, 2021 9:56PM ET
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trading is done on longer term expectations
Murali Brahmandam
Murali Brahmandam Feb 10, 2021 9:55PM ET
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Kathy would not explain because that is a secret
Hammad Alam
Hammad Alam Feb 10, 2021 8:27PM ET
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you didn't explain ''Why'' dollar was undaunted, which is heading.
Justin McNaughton
Justin McNaughton Feb 10, 2021 8:27PM ET
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no one knows that.
Raul Rivero
Raul Rivero Feb 10, 2021 8:07PM ET
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good work for investment property
John Njoya
John Njoya Feb 10, 2021 8:06PM ET
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Rising of 10years bod yield might push inflation up
Lonnie Shelton
Lonnie Shelton Feb 10, 2021 5:52PM ET
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like most others
Cathy Bartlett
Cathy Bartlett Feb 10, 2021 5:52PM ET
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The daunting, hand wringing and the road to serfdom will come later...
Lonnie Shelton
Lonnie Shelton Feb 10, 2021 5:51PM ET
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Crap grammer and more propoganda. The USD is essentially worthless and debt is out of control. Inflation is already here and it is going to worsen exponentially. hopefully this post isn't deleted instantly like list others.
The Chad Bull
The Chad Bull Feb 10, 2021 5:51PM ET
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*grammar
CS One
CS One Feb 10, 2021 5:51PM ET
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kathy lien is a scam , been seen her posting since daily fx and fxcm , her and that fat headed russian boris do not have any interest in making you money
Jack Reacher
Jack Reacher Feb 10, 2021 5:51PM ET
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The Chad Bull haha good one
John Smit
John Smit Feb 10, 2021 5:51PM ET
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*grammar
Jack Reacher
Jack Reacher Feb 10, 2021 5:51PM ET
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CS One if  Katty Lean and Boris Baklava would be making real money, they wouldn't be writing articles, isn't it obvious .. hahaha
Bulent Ok
Bulent Ok Feb 10, 2021 5:48PM ET
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Great write-up... On the ball
Abbas Khan
Abbas Khan Feb 10, 2021 5:48PM ET
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what expectations about usd down up
Paul Barron
Paul Barron Feb 10, 2021 5:46PM ET
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Thanks
Abbas Khan
Abbas Khan Feb 10, 2021 5:46PM ET
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what expectations about usd down up
Kevin Wear
Kevin Wear Feb 10, 2021 5:42PM ET
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2% inflation might be closer than most people anticipate. . .
Michael Anderson
Michael Anderson Feb 10, 2021 5:42PM ET
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Its already there
Joel Schwartz
Joel Schwartz Feb 10, 2021 5:42PM ET
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We’re getting 2% inflation in the IWM every week at this rate.
Chris Kirk
Chris Kirk Feb 10, 2021 5:42PM ET
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Awesome article like always!
Abbas Khan
Abbas Khan Feb 10, 2021 5:42PM ET
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what expectations about usd down up
Alessandro Peruch
Alessandro Peruch Feb 10, 2021 5:23PM ET
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Happy Lunar New Year to all !
 
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