US Dollar set to boom with Powell’s transparency, continuity and normalization pledge

New Federal Reserve Bank Chairman Mr. Jerome Powell is set to testify before the US Senate banking committee at the times when the US Dollar has been suffering against major counterparts. Reasons were pretty simple. The Euro, common currency of Eurozone countries benefitted from US market going for holidays and subsequent diminishing of FX market liquidity.

This has been particularly pronounced at times when forward-looking indicators like purchasing managers’ index from IHS/Markit, or prominent German business climate indicator from IFO Institute for Germany both showed promising rises. This is particularly important at the time when Eurozone’s powerhouse and its largest economy also looks ready for a reunion of so-called Grand Coalition of Merkel’s CDU/CSU and social democratic SPD of Martin Schulz.

The US Dollar was revived by the new home sales figures that rose to the highest level in last decade on Monday and with the market focus shifting to Powell’s nomination hearing, the US Dollar is seen benefitting from pledges of transparency, continuity and balance sheet normalization.

The introductory statement of Jerome Powell’s testimony has been made public on Monday with following key quotes:

  • “We are transparent and accountable in many ways. Among them, we affirm our numerical inflation objective annually and publish our economic and interest rate projections quarterly. And, since 2011, the Chairman has conducted regular news conferences to explain the FOMC’s thinking.”
  • “We expect interest rates to rise somewhat further and the size of our balance sheet to gradually shrink. However, while we endeavor to make the path of policy as predictable as possible, the future cannot be known with certainty.”

I don’t know what will be said during the nomination hearing, but I can assume that promising continuity and transparency is the best thing anyone can do while running for such a high profile position.