EUR/USD Recovers Above 1.1830 After Powell Testimony
- EUR/USD advanced 0.50% after Fed Chair Powell’s dovish tone toward the US economy
- Gold gained over $25 as market participants sought safe havens while the US dollar slipped
EUR/USD Recovers Above 1.1830
The EUR/USD advanced over 0.50% on Wednesday following Fed Chair Jay Powell’s testimony before Congress. Market participants were largely expecting Mr. Powell’s speech to get insights on how to approach the currency market and the US dollar, in particular.
The current market environment presents certain challenges such as high inflation reports that threaten to overshadow the quick economic expansion and to create increased uncertainty in the currency market. On that note, Mr. Powell’s comments acted to assuage the market that the US central bank remains in control of the ongoing economic developments.
Prompted by Chair Powell’s dovish tone, the US dollar depreciated against the euro as the exchange rate climbed to a session high of 1.1838 and ended the trading day at 1.1835. The pair was subdued below 1.1800 for the most part of Wednesday’s session.
During his testimony, part of Fed’s semiannual Monetary Policy Report, Jay Powell reassured traders and investors that the Federal Reserve remains committed to its monetary policy approach and has no intention yet to unwind or in any way alter its stimulus support.
“We continue to expect that it will be appropriate to maintain the current target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee’s assessment of maximum employment,” the Fed Chair said at his congressional hearing.
On the topic of the recent surge in prices, after the June inflation report came in hotter than expected at 5.4%, Mr. Powell admitted that inflation has “increased notably” as he also said he expected higher prices to remain “elevated in the coming months before moderating”.
Investors Flock to Gold as it Gains Ground
Currency traders reacted by selling dollars and flocking to the euro, the yen, the franc, and gold. The EUR/USD continues to trade higher today as it built on yesterday’s upside momentum. The USD/JPY fell 0.61% on Wednesday, while the USD/CHF declined 0.60%.
Gold climbed over $25, or 1.4%, to $1,825 per troy ounce following the congressional hearing. The precious metal is currently hovering right over the $1,830 mark.
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