Fed Quick Analysis: Powell pummels US Dollar with five dovish comments

The Federal Reserve has left interest rates unchanged as expected.
Fresh forecasts narrowly favored three cuts rather than two, weighing on the Greenback.
Fed Chair Jerome Powell provided a plethora of dovish comments.

Yohay Elam FXStreet

Party in the USA – for stock markets, gold, everything except the US Dollar. Not only has the Federal Reserve (Fed) left interest rates unchanged, but it has also refrained from changing the median forecast for borrowing costs in 2024.

While one member opted for a higher path for interest rates this year – and the median has been upgraded for 2025 and 2026 – the tone was dovish. Here are five significant dovish comments from

1) Risks are more balanced – inflation fears are not as strong as they used to be. That was a strong opening remark.

2) The goal is to get inflation down "over time" – stressing over time. There is no rush to crush inflation further.

3) He downplayed recent inflation data, which was hotter than expected. He said it does not change the overall picture.

4) The Fed is set to reduce its Quantitative Tightening (QT) program relatively soon. It means the pace of withdrawing money from markets will slow, thus more dollars sloshing around – a weaker currency and higher risk assets.

5) Strong jobs do not equal higher inflation: He says that a strong labor market, is in of itself, is not a reason to be worried about inflation.

The US Dollar is down, Gold is up, and stocks are rallying. Will it continue? I see the bank's tone as decidedly dovish, resulting in an extension. There will be pullbacks, but Wall Street is well trained to buy the dip, which has been going on since 2009.

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Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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