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US dollar is getting cheaper on expectations of Jerome Powell’s speech

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US dollar is getting cheaper on expectations of Jerome Powell’s speech
February 26
09:00 2018

The week began with the cheapening of the national currency of the United States relative to the euro and the yen. The reason for this was pushing down the yields of US Treasury securities. In addition, the expectation of Jerome Powell’s speech in Congress has affected the behavior of the US dollar. We recall that this will be the first time when a talented American lawyer appears in his new status, namely, as Chairman of the Federal Reserve.

Before the speech of Mr. Powell, the US Federal Reserve published a report on the monetary policy for the last six months. Based on the facts presented in the promulgated document, analysts made a disappointing conclusion. Investors believe that the US Central Bank is not going to accelerate the pace of raising the base rate this year.

Pushing down the yield of the US Treasury securities to 2.87% per annum has become the result of the experts’ disappointment. By the way, their growth was the reason for the recent drawdown of the stock market. So, reducing the yield of the US Treasuries will certainly lead to a revival in the stock market.

The report also contained the Fed’s position on inflation, unemployment and wage growth. Analysts of the Federal Reserve still believe that the inflation in the current year will come close to a two-percent mark. As for the unemployment rate, there we see its abnormally low level. At the same time, the growth rate of wages is not so great.

At the moment, the EUR / USD currency pair is being traded at 1.2325. At the close of the previous session, the ratio for this pair was 1.2295. The US dollar against the Japanese national currency fell to the level of 106.57 yen for 1 US dollar (at the close of the last session, this figure was 106.89).

Most likely, the yen will continue its further growth relative to the US dollar. The public statements of Haruhiko Kuroda, Governor of the Bank of Japan, help to strengthen the national currency. We recall that he has delivered his speech today in the Parliament. Mr. Kuroda confirmed that the current monetary and credit policy would be preserved and his agency would strive for an inflation rate of 2%.


The material was prepared with the participation of Katya Gordon,
a leading analyst of the brokerage company CT Trade

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