Powell’s Comments Result In A Pull In The USD Value, The Yen Flies High

The early European trading session on Thursday turned into a bloodbath for the USD, all thanks to comments from Jerome Powell.

The Federal Reserve chair was clear in mentioning that they have a clear mindset about interest rate hikes. They have decided that they will be bringing down the interest rates in near future.

The comments from Jerome Powell were enough to cause a great storm in the entire foreign exchange market. The investors pulled out of the USD in the upcoming days, resulting in a major bloodbath.

On the other hand, the currencies that were hit the hardest by the rising price of the dollar have benefited the most. Among these currencies are the Japanese yen whose price has skyrocketed.

The Dollar Price Slumped

A great slump has been recorded in the Thursday trading session after the comments came out from the Feds chair.

The frenzy spread across the entire forex market and saw the investors pulling their support out of the USD.

This has caused the trading price of the USD to move in a negative direction. The rest of the currencies versus the dollar have performed well.

The US dollar index (DXY) has witnessed a 0.2% dip in the Thursday trading session. The DXY is currently sitting at 105.705.

A day earlier, the DXY had recorded a huge slump, moving down by 1% in the Wednesday trading session. The statistics suggest that the DXY has recorded an overall 5% dip in the month of November.

The DXY had not witnessed such a bad performance for over a decade. The last time it witnessed such a bad situation was back in September 2010.

Comments by Jerome Powell

Powell did not take long in sharing the final consensus of the November meeting with all the economic observers.

He stated that the December meeting is going to be the first after June when they will make an announcement about lowering the interest rates.

He added that in the November meeting, they agreed upon the moderation of the interest rates in the following meets.

It confirms that as of now, the Feds are determined to lower the interest rates in the December meeting. However, there is no knowing what the market data has stored for the Feds to surprise them.

If there are any turn of events for the US economy, which is currently headed in the right direction, then the Feds may have to go back on their decision.

For now, there is no indication that the Feds have any plans of going back on their consensus.

The statement from Powell came directly from Washington where he delivered a speech at the Brookings Institution event.

Rate Hikes in from June until now

The Feds were forced to make the harsh decision of hiking the interest rates because the inflation was going out of control.

The US economy was headed in the wrong direction and the Feds came up with a plan to fix the problem. At that time, hiking the interest rates was the only effective strategy against rising inflation.

After holding several meetings, the Feds finally decided that they would continue hiking the interest rates by 75 basis points to bring the inflation under control.

With the interest rate hikes, the dollar was gaining more strength versus the rest of the major currencies.

The strategy has been in practice even now but with the inflation rates in control, the Feds have decided to lower the hikes.

This has caused the value of the dollar to move downwards while the rest of the major currencies have grown stronger against the greenback.

USD Price Action

In the latest trading session, the USD/JPY pair has lost 1.1% of its value and it is now down to 136.50. It is a three-month low the dollar has witnessed against the yen.

The EUR/USD pair has recorded a 0.1% surge and it is now at 1.0417. The GBP/USD pair has risen 0.2%, the AUD/USD pair has risen 0.3%, and the USD/CNY pair has fallen 0.2%.