Dollar Rebounds After Powell's Speech, But Fails To Hold Gains
The U.S. dollar rebounded after early weakness on Thursday, lifted by Federal Reserve Chairman Jerome Powell’s announcement about a new strategy for meeting price stability and employment goals.
During his speech at the virtual Jackson Hole economic symposium, Powell said that the Fed will change its approach to a “flexible form of average inflation targeting.” He stressed that the longer-run goal continues to be an inflation rate of 2% but noted inflation will average less than that if it runs below 2% following economic downturns and never moves about that level even when the economy is strong.
The dollar also reacted to data on economic activity, unemployment claims and pending home sales. Economic data from eurozone, Switzerland and Japan too impacted dollar’s movements.
According to a report from the National Association of Realtors, the pending home sales index spiked by 5.9% to 122.1 in July after soaring by 15.8% to 115.3 in June. Economists had expected pending home sales to surge up by 3%.
Pending home sales increased for the third straight month after plummeting in March and April and are now up by 15.5% compared to the same month a year ago.
The Labor Department’s data showed initial jobless claims dropped to 1.006 million in the week ending August 22nd, a decrease of 98,000 from the previous week’s revised level of 1.104 million. Economists had expected jobless claims to decline to 1.000 million from the 1.106 million originally reported for the previous week.
A report released by the Commerce Department showed economic activity in the U.S. contracted slightly less than initially estimated in the second quarter, although it still showed a sharp drop in gross domestic product.
The report said real gross domestic product plummeted by 31.7% in the second quarter compared to the previously reported 32.9% nosedive. Economists had expected the plunge in GDP to be revised to 32.5%.
The dollar index, which was down at 92.42 in early New York deals, rose to 93.32 after Powell’s speech, but retreated to 93.00 later on in the day, netting a small loss.
Against the Euro, the dollar weakened to $1.1901 before recovering to $1.1766. However, it pared gains subsequently and was last seen at $1.1823, marginally up from Wednesday’s $1.1832.
Eurozone money supply and private sector credit growth accelerated in July, according to a report from the European Central Bank. The monetary aggregate M3 expanded 10.2% on year versus a 9.2% rise in June. The rate was expected to remain unchanged at 9.2%. At the same time, narrow measure M1 growth improved to 13.5% from 12.6% in June.
The Pound Sterling was at $1.3198, down slightly from previous close.
The Yen was weaker at 106.57 a dollar, going down by more than 0.5%.
Against the Aussie, the dollar was hovering around 0.7259, more than 0.3% from Wednesday’s close.
The Swiss franc was marginally weak at 0.9091 a dollar, while the Loonie was stronger by about 0.13% at 1.3126 a dollar. Switzerland’s economy contracted at a record pace in the second quarter as economic activity was severely restricted amid the coronavirus pandemic but the pace of fall was less than economists’ expected, official data from the State Secretariat for Economic Affairs, or SECO, showed.
Gross domestic product fell 8.2% sequentially in the second quarter after falling 2.5% in the previous quarter, This was the sharpest fall since records began in 1980. Economists had forecast a larger contraction of 8.6%.
Data from Statistics Canada showed Canada’s current account deficit narrowed to C$8.63 billion in the second quarter from a revised C$13.22 billion deficit in the first quarter. Economists expected trade deficit to come in at C$12.2 billion.
The material has been provided by InstaForex Company – www.instaforex.com