The dollar is losing ground to other major currencies during early trading in the aftermath of Jerome Powell’s testimony to Congress late on Wednesday. The Chairman of the Federal Reserve vowed to uphold the central bank’s current accommodative stance until the country’s economic recovery is substantial and the labour market starts approaching pre-pandemic levels. By maintaining a clearly dovish tone, Mr Powell dismissed any near-term change of direction, with monetary policy and asset purchases set to remain unaltered even in the face of a potential spike in inflation. As things stand, dollar softness looks set to remain one of the dominant narratives in foreign exchange for the foreseeable future.
Oil remains in a positive vein with the “long only” mood of the last few weeks continuing to dominate. WTI is now trading above $63, exactly $100 more than the historical low reached 10 months ago, when the price collapsed to -$37. The rally is linked to the risk on scenario and positive sentiment seen on stock markets. Of course, expectation for a full economic recovery, and consequently an increase in oil demand, is another key element. We should also consider inflation expectations with oil seen as an inflation hedge with investors betting on further recoveries.
Share markets edged higher on Thursday amid rising risk-on trading sentiment as a result of the amount of fiscal and monetary aid on offer. Many investors have been reassured by the continuation of the Fed’s massive bond buying program as well as the huge fiscal aid package from the Biden administration. In addition, recent studies showing encouraging results about the effectiveness of vaccines are also contributing to the bullish trend resurgence. With the end of the pandemic now in sight, more and more investors are now betting on a strong economic recovery to come. It seems all the planets are now aligned for bullish investors as bearish leverages are harder and harder to find on stock markets. However, today’s slew of major US data will provide traders with more clues towards where the economy is going.
Pierre Veyret– Technical analyst, ActivTrades
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Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.