The greenback attempts to recover as Chair Powell Sounds less dovish
The U.S Dollar attempted to recovered earlier losses after Federal Reserve Chair Jerome Powell sounded less dovish towards the U.S economy than expected. The Federal Open Market Committee policy statement showed that U.S policymakers remained concerned about the lack of inflation in the U.S economy, although the statement noted the recent improvement in U.S economic data.
The Federal Reserve also said that they remained patient when assessing the direction of interest rates, despite calls for an immediate rate cut from U.S President Donald Trump. The main takeaway for investors was the Federal Reserve’s acknowledgment that U.S inflation was ‘running below target’, which referred to U.S inflation rate persistently undershooting the Federal Reserve’s two percent inflation target.
The central bank’s mention of an improving U.S economy since the last FOMC policy meeting was seen as a significant hawkish tilt by market participants, despite the worries about low inflation The Federal Reserve said that economic activity ‘rose at a solid rate’, which was considerably more bullish than the March meeting, where FOMC members expressed concerns about slowing global growth.
Prior to the FOMC rate decision, the United States economy released the much-anticipated ISM manufacturing survey for the month of April, which fell to its lowest reading since October 2016. Data inside the survey showed that a sharp decline in exports contributed to the slump in United States manufacturing activity last month, which sparked a broad-based sell-off in the U.S Dollar Index.
Jobs data released on Wednesday also highlighted that the American employment situation remains robust, with the ADP jobs report showing that an impressive 275,000 private sector jobs were added to the U.S economy in April. The much better than expected ADP jobs number bodes well for Friday’s Non-farm payrolls job report and goes in-line with the FOMC’s assessment that the jobs market remains a bright spot for the U.S economy.
GBP/USD Daily Mountain Chart | Source: ActivTrader
Sterling has enjoyed a strong bid tone for much of the trading week as the greenback came under broad-based selling pressure, with British pound edging above the 1.3100 mark against the greenback. Key technical support for the GBP/USD pair is currently found at the 1.3000 and 1.2964 level, while key technical resistance is found at the 1.3125 and 1.3155 levels, with extended resistance at 1.3205.
Written by Nathan Batchelor, External Analyst
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