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EUR/USD plunges to one-month low on hawkish Fed Powell Comments

currency-newsEUR/USD plunges to one-month low on hawkish Fed Powell Comments
The US dollar roared higher on Wednesday following some hawkish comments from Federal Reserve Chair Jerome Powell, following the US central bank’s latest interest rate decision.

Meanwhile, trade in the pound is mixed so far this morning, with GBP/EUR flat at €1.1976 and GBP/USD sliding to $1.3411. GBP/CAD is rangebound at C$1.7058, while GBP/AUD and GBP/NZD climb to AU$1.8966 and NZ$2.0312, respectively.

The US dollar will remain in focus today with the publication of the latest US GDP figures. Will a bump in growth in the last quarter of 2021 help to extend the ‘greenback’s bullish momentum today?

What’s been happening?

While the Fed opted to leave interest rates on hold this month, the US dollar was spurred higher in the wake of Jerome Powell’s accompanying press conference.

Powell struck a hawkish tone as he suggested the bank is ‘of a mind’ to raise interest rates at its March meeting, whilst also signalling the Fed could accelerate its current tightening cycle.

The euro traded in a narrow range through the European trading session on Wednesday, as markets braced for the Fed rate decision.

Further limiting movement in EUR exchange rates was some Italian political jitters, amidst uncertainty over Mario Draghi’s future as Prime Minister.

At the same time, the pound was left mostly directionless yesterday as the currency was left paralyzed while traders awaited the publication of the Sue Gray report into breaches of lockdown restrictions in Downing Street, which ultimately did not materialise.

What’s coming up?

Turning to today’s session the focus will be on the publication of the latest US GDP figures.

The preliminary figures for the fourth quarter are expected to report a solid uptick in US economic growth, which could translate into some support for the US dollar.

However, any upside in the ‘greenback’ may be stymied by the accompanying release of last month’s durable goods orders, amidst forecasts order growth will have shrunk last month.

In the meantime, UK political headlines will likely continue to influence trade in the pound, with the possible publication of the Sue Gray report today potentially infusing Sterling with considerable volatility.

Meanwhile, the euro could find some support this morning, after Germany reported a surprise improvement in consumer confidence this month.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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