Powell's power play: Dollar dives on one comment, but has many reasons to rise

  • Fed Chair Powell expresses confidence in his post-rate cut presser. 
  • Several comments have sent the USD higher.
  • More gains may be seen after analysts digest the event.

If the Federal Reserve's statement was not hawkish enough – Chair Jerome Powell confirmed the upbeat stance.

However, one comment on rate hikes seemed to have reversed the course of the dollar's gains, sending it down. Fed Chair Jerome Powell has said that only a significant rise in inflation would trigger a rate hike. 

On the other hand, here are additional comments that may send the dollar back up:

He kicked off the press conference by saying that monetary policy is a good place – hinting that the current policy is the right one. While the bank is committed to supporting the economy, he refrained from hinting further accommodation is needed

Powell described the fresh move as an "insurance cut" – similar to the initial cut the Fed announced in July. That continues the stance that the economy does not require additional cuts. Markets may doubt it as this is the third move in three meetings. Nevertheless, insisting on this wording shows the Fed is reluctant to move in December

What would it take for the Washington-based institution to change its policy? Powell stressed that only a "material reassessment" to the outlook will change the Fed's path of interest rates. His words came in response to a question about the reaction function. His answer shows that the bar is high.

The Fed Chair also covered the strengths and weaknesses of the economy. While he said that manufacturing and investment are falling, he seemed bullish about consumption. He said that consumer-facing companies are reporting that shoppers are doing well. The sector has been unaffected by the slowdown elsewhere. 

Zooming out to the global economy, he said that uncertainty is lower following Phase One of the trade deal and the significant drop in the chances of a no-deal Brexit

Dollar reaction

While the dollar has begun retreating from the highs during Powell's presser – it may resume its rises afterward. The full reaction to Fed decisions often takes several sessions. Traders in Tokyo tend to trigger significant moves, and things move again when European investors join in. 



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.

Analysis feed

Latest Forex Analysis

Editors’ Picks

GBP/USD off 7-month highs, still firmer as Tories hold the lead

GBP/USD retraces from the new seven-month highs of 1.3180 but remains strongly bid, as weekend polls have reaffirmed a solid lead for PM Johnson's Conservatives. Cable dropped on Friday amid upbeat US data.


EUR/USD steadying above 1.1050 amid upbeat German export data

EUR/USD is trading above 1.1050, attempting a recovery after Germany reported an increase in exports in October. EUR/UDS dropped sharply on Friday amid upbeat US Non-Farm Payrolls and weak German industrial output. 


Forex Today: US-Sino trade tensions prevail, Boris closer to victory, EUR/USD licking its wounds

Trade talks: President Donald Trump has called on the World Bank to stop lending to China, a move that may aggravate tensions, with only six days to go until Washington is set to slap new tariffs on Beijing. Negotiations continue.

Read more

Gold clings to modest gains above $1460 level, lacks follow-through

The latest NFP report surpassed most optimistic estimates, which provided a goodish intraday lift to the US dollar and eventually prompted some aggressive selling around the dollar-denominated commodity.

Gold News

USD/JPY in search of a firm direction, stuck in a range above mid-108.00s

USD/JPY was seen oscillating in a narrow band and consolidated last week’s losses. US-China trade uncertainties continued underpinning the JPY’s safe-haven status. Investors now seemed reluctant ahead of the latest FOMC monetary policy update.


Forex Majors