Fed Chair Jerome Powell’s speech forced the Greenback lower on Friday, causing the US Dollar Index to plunge by more than 0.8% in the week. Despite being required to hold the summit virtually due to a surge in COVID-19 cases in Wyoming, Powell started the symposium “on a positive note, telling policymakers he believes “substantial further progress” has been made on some metrics and signalling he believes the time is right for the Fed to start tapering off some of its economic support”. Powell said his “view is that the substantial further progress test has been met for inflation” and “there has also been clear progress toward maximum employment”.
In an effort to support the US’s economic recovery from the COVID-19 pandemic, the US central bank has been making $120B in monthly asset purchases, including at least $80B in Treasury securities per month and at least $40B in agency mortgage?backed securities per month. But amid signs that a “recovery is beginning to take hold, the timeline to wind down those purchases has been the subject of debate among Fed officials – and speculation among analysts and investors”. Powell ended speculation on Friday by noting that “if the economy evolved broadly as anticipated” the US central bank could see it as “appropriate to start reducing the pace of asset purchases this year”. While the Fed are positive that “the intervening month has brought more progress in the form of a strong employment report”, fears continue to grow over “the further spread of the Delta variant”.
Cable was able to capitalize on Friday as the Pound remained firm against a weaker Greenback. GBPUSD started the session at 1.3700 and managed to close the week at 1.3744. This morning the pair trades over 1.3760.
GBPEUR made subtle gains on Friday. The pair opened at 1.1647 and closed at 1.1661.
EURUSD also gained some upside to end last week. The pair opened the morning at 1.1762 and gained over 20 pips to close the session at 1.1786.