The Federal Reserve of the United States is the core of the American Federal Government, so decisions of great economic weight emanate from this governmental entity. Therefore, while traders and investors in the Forex market await the statements of the president of the Fed, the dollar is giving way to the other currencies.
The performance of the dollar was affected by multiple factors that make up the core of its economy. Well, each currency has these institutions and internal elements that directly affect its performance in the Forex market.
In the case of the dollar, the federal government is clearly involved in its future performance at a global level. And while waiting for the statements of Jerome Powell, president of the US Federal Reserve, the dollar is giving way on Forex.
The Dollar Closed Wednesday with a Negative Trend
The United States loses out to the euro
The EUR gained against the dollar on Tuesday after European economic data showed an improvement in German business morale.
This while investors were waiting for comments from Federal Reserve Chairman Jerome Powell. On Thursday, he will speak about the revision of the policy framework of the U.S. central bank.
This is relevant for traders and investors. For, Jerome Powell’s statements, as head of the Fed, which controls short-term interest rates, have more influence on the value of the country’s currency than anyone else. And so, merely waiting for his opinion causes the dollar to give way against other currencies in the Forex market.
Powell is expected to describe what could be the central bank’s most active efforts to push inflation to a healthy level.
The speech he will give is entitled „Review of the Monetary Policy Framework“ and concludes a year-long discussion among central bank officials and with the public.
The „average inflation“ target means that the Fed will allow inflation to be higher than normal for a period of time, hoping that it will eventually regress.
Why did the dollar collapse?
The dollar’s rate to date
At the time of writing, the dollar is quoted on its EUR/USD pair at $ 1.1834. This is a clear indication of the advantage that the Euro took over the dollar, in the east giving way before Jerome Powell’s statements.
In addition, the dollar index against a basket of currencies fell by 0.21%, reaching a value of 93.08.
The zero interest rate and concerns about a more moderate inflationary policy have reduced the attractiveness of the U.S. currency.
Meanwhile, a relatively high level of COVID-19 infections also casts doubt on the speed of the U.S. economic recovery, relative to other regions, including Europe, according to Reuters reports.
Will the performance of the dollar recover its energy after Jerome Powell’s statements this Thursday?