- EUR/USD reversed its direction after testing 1.1900 on Thursday.
- FOMC Chairman Powell's remarks triggered sharp fluctuations in DXY.
- Data from US showed that economy contracted by 31.7% in second quarter.
The EUR/USD pair surged to a fresh weekly high of 1.1899 in the early American session but staged a sharp U-turn and dropped into the negative territory. As of writing, the pair was down 0.35% on a daily basis at 1.1788.
DXY settles in the positive territory above 93.00
At his highly-anticipated speech at the Jackson Hole Symposium, FOMC Chairman Jerome Powell announced that the Fed will be adopting average inflation target as part of its new policy strategy. Although the initial reaction caused the USD to come under heavy selling pressure, additional comments from Powell provided a boost to the currency.
Powell noted that the Fed will not tie itself to a particular method to define average inflation and added that any inflation overshoots are expected to be moderate. The US Dollar Index, which slumped to a low of 92.42, was last seen gaining 0.35% on the day at 93.22. A sharp upsurge witnessed in the US Treasury bond yields seems to be helping the greenback preserving its strength. At the moment, the 10-year reference is up nearly 7% on the day.
Meanwhile, the US Bureau of Economic Analysis in its second estimate said that the economy contracted by 31.7% in the second quarter. This reading came in better than the previous estimate of 32.9% and the market expectation of 32.5%.
Later in the session, European Central Bank's (ECB) chief economist Philip Lane will be speaking at the Jackson Hole summit as well.
Technical levels to watch for
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.
Recommended content
Editors’ Picks
EUR/USD turns negative near 1.0760
The sudden bout of strength in the Greenback sponsored the resurgence of the selling pressure in the risk complex, dragging EUR/USD to the area of daily lows near 1.0760.
GBP/USD comes under pressure and challenges 1.2500
GBP/USD now rapidly loses momentum and gives away initial gains, returning to the 1.2500 region on the back of the strong comeback of the US Dollar.
Gold retreats from highs on stronger Dollar, yields
XAU/USD trims part of its initial advance in response to the jump in the Dollar's buying interest and the re-emergence of the upside pressure in US yields.
XRP tests support at $0.50 as Ripple joins alliance to work on blockchain recovery
XRP trades around $0.5174 early on Friday, wiping out gains from earlier in the week, as Ripple announced it has joined an alliance to support digital asset recovery alongside Hedera and the Algorand Foundation.
Week ahead – US inflation numbers to shake Fed rate cut bets
Fed rate-cut speculators rest hopes on US inflation data. After dovish BoE, pound traders turn to UK job numbers. Will a strong labor market convince the RBA to hike? More Chinese data on tap amid signs of slow Q2 start.