US dollar strengthens as Jerome Powell to remain Fed chair

Philip McHugh November 23rd 2021 - 2 minute read

The US dollar got off to a strong start this week, after it was confirmed that Jerome Powell will remain chair of the Federal Reserve.

The pound, meanwhile, is subdued in early trade this morning, with GBP/EUR slipping to €1.1898 and GBP/USD muted at $1.3380. GBP/CAD is rangebound at C$1.7025, while GBP/AUD and GBP/NZD hold steady at AU$1.8534 and NZ$1.9297 respectively.

Looking ahead, will soft Eurozone PMIs propel the euro lower this morning?

What’s been happening?

The US dollar strengthened on Monday, following the news that US President Joe Biden nominated Jerome Powell for a second four-year term as chair of the Federal Reserve.

The news was well received by USD investors as Powell is viewed as more hawkish than Lael Brainard, who was reportedly also in contention for the position, but will now become vice-chair.

The euro, meanwhile, found itself on the defensive at the start of this week, with EUR investors fearing that more European countries could follow Austria into lockdown, amidst a starling rise in Covid cases across the continent.

At the same time, the pound also struggled to find support yesterday, following comments made by Bank of England (BoE) governor Andrew Bailey over the weekend, in which he came across as less hawkish regarding inflation than he did in prior remarks.

What’s coming up?

The publication of the latest PMI releases from both the Eurozone and UK will likely be the main focus for investors today.

First up will be the Eurozone release, which could pressure the euro as it is expected to report growth in the bloc’s private sector continued to slow in November, having previously struck a six-month low last month.

The UK is also expected to report a slowing of economic activity in both the manufacturing and service sector this month, although with growth still expected to be stronger than that of the Eurozone, the pound may fare better this morning.

We will also see the release of the US Markit PMIs later this afternoon. While not as influential as the ISM figures, their release could nonetheless provide some modest support for the US dollar later this afternoon, as they are expected to report an acceleration of growth in the US private sector this month.

Written by
Philip McHugh

Select a topic: