Fed pause strengthens U.S. currency

05 February 2024 81
Fed pause strengthens U.S. currency

Federal Reserve Chairman Jerome Powell said the Fed is waiting for more economic data to confirm that inflation is moving down toward its 2% target.

 

In an interview with the CBS program "60 Minutes," which aired Sunday night, Powell sought to explain to a broad public audience the central bank's rationale for its policy moves.

 

The “danger of moving too soon is that the job’s not quite done, and that the really good readings we’ve had for the last six months somehow turn out not to be a true indicator of where inflation’s heading,” Powell said in the interview.

 

"The prudent thing to do is to just wait a little while longer and see that the data confirm that inflation is moving down to 2% in a sustainable way." 

 

Powell said it isn’t likely that the Federal Open Market Committee, the panel that sets interest rates, “will reach that level of confidence” about inflation’s path by its March 19-20 gathering.

 

By the end of last year, the Fed’s preferred inflation metric slowed to a rate of 2.6%, well below its peak of 7.1% in mid-2022. While that’s still above the Fed’s 2% goal, the labor market remains strong. Data out Friday showed unemployment held at a historically low 3.7% in January as employers added another 353,000 jobs.

 

The new justification of the Fed's stance forms a strong support for the U.S. dollar, which will influence the markets over the coming months.

 

As a contrasting position, the results of the Bank of England members' vote could be cited. They showed an increase in sentiment on possible policy easing, which will lead to a weakening of the British pound and a decline of the GBPUSD pair.

 

The final recommendation is to sell GBPUSD. The profit could be fixed at the level of 1.2350.

The loss — at the level of 1.2850.

This content is for informational purposes only and is not intended to be investing advice.

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