Stimulus speaks positivity drops dollar
The increasing likelihood that Congress will do so passes President Joe Biden’s $ 1.9 billion stimulus plan raised fears of a possible rise in inflation. As expectations rose, the popularity of the so-called reflection trade, which pulled the dollar lower, rose.
But in testimony before the U.S. Senate Banking Committee, Powell said the central bank will keep its policies in place as it drew attention to getting Americans back to work.
“The economy is far from our employment and inflation targets, and it is likely to take some time before significant further progress is made,” Powell said.
Powell said in 2020 the central bank would be prepared to drive inflation higher than its target rate for periods to average 2%.
Powell did not allay fears of inflation, but the central bank’s overall support for the economy may have kept the dollar afloat on Tuesday.
“For the dollar, the jury remains out on which direction the next important step will be, even if it is for the time being. Inflation problems can be offset by hopes for faster US economic recovery, as the distribution of vaccine is expected to increase in the coming weeks, ‘said Ronald Simpson, managing director of Action Economics’ global currency analysis.