Jerome Powell causes volatility

Source: Dukascopy Bank SA


The Chairman of the US Federal Reserve Jerome Powell has just caused market volatility. Comments made at a testimony before US Congress committee have created various market reactions. In general, the head of the US monetary policy makers has stated that he still expects to cut interest rates during this year. This aspect is good for the financial markets, but caused USD weakness.

However, the Chairman also said that he is not assured that inflation is going to go down. If inflation remains persistent, the central bank would have to keep rates high. High rates would create a strong Dollar and weak financial markets.

As the news came in, stock markets went down on the comments of inflation returning. Although, currency markets concentrated more on the US Dollar side and the rate cut, which caused a decline of the USD. After the Dollar went down, the market slightly recovered. Namely, everyone interprets the cut expected versus inflation possible argument via own perspective.
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