Forex Today: Fed's Powell saves stocks, sinks dollar, focus shifts to stimulus

Yohay Elam FXStreet

Here is what you need to know on Wednesday, February 24:

The market mood is mixed on Wednesday after a turbulent Tuesday – the Fed's Powell soothed markets by promising support, weighing on yields and the dollar. Bitcoin's whipsaw continues, a delay in Europe's vaccines, another appearance by Powell and fiscal stimulus talks are eyed.

Federal Reserve Chair Jerome Powell told Congress that the outlook has improved but there is still a long road to recovery. He reiterated that any rise in inflation will likely be transitory and that the Fed has tools to deal with it. On fiscal stimulus, Powell said that he does not see how a burst in spending would lead to higher inflation.

His words sent stocks bouncing from the abyss, with the S&P 500 closing higher on the day. The benchmark ten-year bond yields retreated from 1.40% and pushed the dollar further down. Powell returns to Capitol Hill on Wednesday. Lael Brainard and Richard of the Fed will also be speaking.

See Dollar tumbles as Powell says no rate hike, no taper

Fiscal stimulus: Democrats are set to bring President Joe Biden's $1.9 trillion stimulus plan to vote in the House on Friday, a significant step forward.

Bitcoin is changing hands around $50,000 after a whipsaw earlier this week. The cryptocurrency's decline from the highs decreased the fortunes of Tesla founder Elon Musk. Ark Investment Management's Cathie Wood noted that they fall to $46,000 is a healthy correction.

More Cryptocurrencies Price Prediction: Cardano, Ethereum & Dogecoin – Asian Wrap 24 Feb

GBP/USD stands out with a surge above 1.42, buoyed by dollar weakness and also speculation that the Bank of England would raise rates sooner rather than later. BOE Governor Andrew Bailey and several of his colleagues will speak on Wednesday. Moreover, the British media reports that the UK may exit the lockdown sooner than the current end date of June 21.

EUR/USD has been lagging behind its peers, partially due to prospects of extended lockdown measures in Germany and AstraZeneca's announcement of yet another cut in AstraZeneca's delivery of vaccines to the old continent. The firm slashed by half its provisions for the second quarter, from 180 to 90 million doses.

NZD/USD advanced above 0.7350 after the Reserve Bank of New Zealand left its rates unchanged as expected. Governor Adrian Orr noted that the kiwi would be higher if not for the RBNZ's actions.

More Five factors moving the US dollar in 2021 and not necessarily to the downside

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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USD/JPY pulls back from three-week high after failing near 159.00

USD/JPY edges lower during the Asian session on Friday, stalling its recent strong move to a three-week high of 159.00 as Japanese Yen bears turn cautious amid intervention fears. Meanwhile, the US Dollar retains a strong bullish undertone as the Fed's hawkish outlook and oil-driven inflation fears continue to push US bond yields to multi-year peaks. Furthermore, the BoJ's dovish rate hike last week might cap JPY and support spot prices.

Gold treads water below $4,300

Gold grabs some buying attention and advances marginally at the end of the week, partially retracing the weekly decline, although it is still navigating below the key $4,300 mark per troy ounce. The fresh selling bias on the Greenback and the modest decline in US Treasury yields appear to support the humble advance in the precious metal.

Crypto Today: Bitcoin and Ethereum edge lower, XRP extends recovery as macro headwinds weigh

The broader cryptocurrency market is consolidating on Friday, with Bitcoin paring losses slightly above $84,000. Ethereum declines in tandem with BTC. Ripple (XRP), meanwhile, paints a different picture.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Federal Reserve (Fed) and the Bank of Japan (BoJ) have just done something remarkably similar. Both central banks raised interest rates by 25 basis points (bps) last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.