Sign up to create alerts for Instruments,
Economic Events and content by followed authors
Free Sign Up Already have an account? Sign In
Quotes
All Instrument Types
- All Instrument Types
- Indices
- Equities
- ETFs
- Funds
- Commodities
- Currencies
- Crypto
- Bonds
- Certificates
Please try another search
⏳ FLASH SALE: Get 50% off InvestingPro | Stop guessing, start investing
Claim Sale
U.S. Dollar Outlook And 3 Main Takeaways From Fed
ng.investing.com/analysis/us-dollar-outlook-and-3-main-takeaways-from-fed-84696
U.S. Dollar Outlook And 3 Main Takeaways From Fed
By Kathy Lien | Jul 28, 2021 22:58 The U.S. dollar traded lower against most of the major currencies on the back of the Federal Reserve’s monetary policy announcement. EUR/USD rose to its strongest level in nearly two weeks, while USD/JPY dropped back below 110. Interestingly enough, Fed Chairman Jerome Powell did not appear overly concerned about the Delta variant.
In the press conference he said, “What we’ve seen is with successive waves of COVID over the past year and some months now, there has tended to be less in the a way of economic implications from each wave. We’ll see whether that is the case with the Delta variety. But it’s certainly not an unreasonable expectation.”
This implies that policy-makers will watch virus trends carefully, but there’s no immediate cause for alarm or shift in expectations for taper. Barring a return to a complete lockdown, the Fed will continue its discussions on reducing asset purchases later this year.
The FOMC statement contained a few changes, none of which were extremely market-moving. The Fed took out the line about vaccinations reducing “the spread of COVID-19” in the U.S., but also the word “significantly” from the sentence about the “path of the economy” continuing to “depend on the course of the virus.” This slightly less pessimistic outlook should have been positive for the U.S. dollar, but the greenback sold off when Powell made it clear that while timing is being discussed, it could be months before an official announcement is made.
Investors sold U.S. dollars for the following reasons:
1. Fed Downplayed Inflation Rise: Powell admitted that inflation is higher than expected, but called for a bit of patience because he still believes price pressures will fade and most of the recent increases by businesses are one-offs.
2. Made No Decisions On Taper Timing: While Powell said the Fed took its “first deep-dive” on how to scale back bond buying, no decisions about the timing of taper were made. He added that ideally you would not raise rates before you taper, and the central bank is still a ways away from considering raising interest rates.
3. Said No Substantial Further Progress Made: Pointing to the millions of people still unemployed, Powell stressed that the economy is still a good deal away from making substantial further progress towards stable prices and maximum employment.
The main takeaway from today’s FOMC is the central bank remains cautiously optimistic and in no rush to reduce asset purchases. It gave investors very little confidence that a signal to reduce bond buying would come in August. With the uncertainty of the Delta variant in the U.S. and abroad, it will watch how the situation progresses and make a decision on whether to delay a signal when the time comes next month.
This is a wise choice considering that states and businesses are beginning to respond to the Center for Disease Control and Prevention’s recommendation for masks in states with high virus rates. Just today, Nevada reinstated a mask mandate in Las Vegas and other high-transmission areas. Kansas City brought back its mandate and Apple (NASDAQ:AAPL) said it will be asking all staff and shoppers to wear masks at most stores regardless of vaccination status. Mask mandates won't curb economic activity, but if more shoppers are spooked by the Delta variant, the pace of recovery could slow. Stocks pulled back for the first time in seven trading days. Delta virus concerns means more losses are to follow, which could translate into gains for the Japanese Yen and Swiss Franc.
Related Articles
EUR/USD: US CPI Miss Lifts Euro, but Treasury Yields Say Not So Fast
By David Scutt - May 14, 2025
U.S. CPI miss sinks dollar, lifts euro U.S. Treasury yields rise, Fed rate cut pricing dwindles EUR/USD eyes 1.1200 as pivot Bearish signals building in momentum Major US...
US Dollar Retreats on CPI Miss Despite Optimism Over Trade Deal
By Francesco Pesole - May 14, 2025
The greenback has not held on to post-trade-deal gains for long, and while a soft CPI was the trigger for the correction, we think yesterday’s moves signal a clear preference for...
US Dollar Rises Amid Sticky CPI Expectations and Easing Trade...
By Chris Turner - May 13, 2025
Some calm is returning to FX markets after another day of trade-driven volatility. The 90-day pause in the US-China trade war has allowed the US dollar to recoup some losses,...
U.S. Dollar Outlook And 3 Main Takeaways From Fed
Add Chart to Comment
Confirm Block
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.
Report this comment
I feel that this comment is:
Comment flagged
Thank You!
Your report has been sent to our moderators for review
Add a Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.