• Fed Chair Powell committed to buying more bonds if necessary.
  • Soothing words of support allowed stocks to recover and the dollar to rise.
  • Strongly urging Congress to act refocuses market perspective. 

Markets want money– shares initially dropped when the Federal Reserve offered only guidance but no new bond-buying. However, a dose of honey can go in some ways. Jerome Powell, Chairman of the Federal Reserve, reaffirmed the bank's commitment to supporting the economy and also stated that the institution has the ability to buy more bonds. 

That has was enough to reverse the drop in equities and send the dollar back down. The S&P 500 Index turned positive and EUR/USD is jumping back to 1.22. What is next after this whipsaw?

The ball returns to Congress' court. With a week to go until Christmas, the place to get a gift from Santa is Capitol Hill. Powell said that that there is a "very strong case" for additional fiscal stimulus. Despite upgrading growth forecasts and saying that he expects strong economic performance in the first half of 2021, he continues urging elected officials to act. 

Investors are encouraged that Republicans and Democrats reportedly put their contentious points aside and are settling on agreeing on the easier points – worth some $900 billion. They are probably also happy to hear that President-elect Joe Biden refers to this upcoming accord as a "down-payment" – ahead of additional support later on. 

Sealing the deal in Congress would likely be needed to send trigger the next meaningful EUR/USD rally and a surge higher in the S&P 500 Index. For GBP/USD, it all revolves around Brexit

Overall, Powell refrained from acting now but is ready to support the economy 0 and markets – in the upcoming challenging months as the world transitions from a harsh stage in the pandemic to herd immunity thanks to vaccines. However, the next short-term risk-on move in markets is not coming from him now.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD extends slide toward mid-1.0200s after US data

EUR/USD extends slide toward mid-1.0200s after US data

EUR/USD continues to decline toward 1.0250 during the American trading hours on Friday. After the data published by the UOM showed that the long-run inflation outlook rose to 3% in August from 2.9% in July, the dollar gathered strength against its rivals, weighing on the pair.

EUR/USD News

GBP/USD pushes lower 1.2100 on broad dollar strength

GBP/USD pushes lower 1.2100 on broad dollar strength

GBP/USD is trading deep in negative territory near 1.2100 during the American session on Friday. With the UoM's Consumer Sentiment Survey pointing to a modest increase in the long-run inflation outlook, the US Dollar Index extended its rally, reflecting a broad dollar strength.

GBP/USD News

Gold clings to modest gains above $1,790

Gold clings to modest gains above $1,790

Gold stays relatively resilient on Friday and trades modestly higher on the day above $1,790. Although the greenback continues to outperform its rivals on the latest US data, falling US Treasury bond yields help XAU/USD hold in positive territory.

Gold News

Shiba Inu ready to go ballistic: Shiba Eternity released in Vietnam

Shiba Inu ready to go ballistic: Shiba Eternity released in Vietnam

Shytoshi Kusama, the project leader of Shiba Inu announced the launch of Shiba Eternity for Vietnamese players. The game is available for testing and the team has asked users for their review. 

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Majors

Cryptocurrencies

Signatures