The reality of FED Powell’s speech

Exclusive Capital Research Team

Exclusive Capital Research Team

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Forex Update, Tuesday, 22nd of September, 2020

The dollar was up on Tuesday morning in Asia, clinging on to gains from the previous session as COIVD-19 fears and worries over the U.S. Congress’ stimulus impasse drove a heavy selloff in almost all other assets.

A fresh outbreak of COVID-19 in Europe, with the looming specter of fresh lockdowns, and jitters over the continuing impasse in the U.S. Congress over the latest stimulus measures as the U.S. presidential election draws nearer, also saw investors turning to the greenback.

In retrospect, Federal Reserve Chair Jerome Powell said the ‘U.S. economy is improving but has a long way to go before fully recovering from the coronavirus pandemic. He further confirmed the feds plan to accommodate periods of high inflation to reach it 2% inflation target to get employment figures back to where they were pre COVID without raising interest rates at least till 2023.

The reality of high inflation with low-interest rates, further stimulus, political and geopolitical uncertainty could see investors move back to haven assets which traditionally give a return of 2-3% over and above inflation.

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