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Dollar Rallies on Powell’s New Term as Fed Chairman

US dollar rallies early in the week as President Biden nominates Jerome Powell for a second term as head of the Federal Reserve.

SageFX - Nov, 23, 21

*Sage FX would like to state that traders should research extensively before following any information given hereby. Any assumptions made in this article are provided solely for entertainment purposes and not for traders to guide or alter their positions. Please read our Terms & Conditions and Risk Disclosure for more information.

Principal Points

  • US dollar gains against major currencies, including the euro and the British sterling
  • President Biden reappoints Jerome Powell as head of the US Federal Reserve

What’s Moving in the Markets?

The US dollar rallied against its currency peers in the forex market on Monday. The greenback was boosted by President Joe Biden’s reappointment of Jerome Powell for a second term at the Fed. In more detail, Mr. Powell will lead the US central bank as a chairman for another four years.

As a result, traders flocked to the US dollar, driving its valuation higher by about half a percent against major currencies. The EUR/USD, for example, lost about 0.4% as the US dollar advanced broadly. Moreover, early on Tuesday, the exchange rate dipped to a new low of 1.1230, a level last seen in early July 2020.

The GBP/USD, in addition, slipped roughly 0.5% to reach a session low of 1.3385. Also, the USD/CAD and the USD/CHF added more than 0.5%, while the USD/JPY rallied 1% to peak at levels above 115.00.

Overall, a broader upside swing of the US dollar defined the currency space on Monday and early Tuesday.

What’s the Big Picture for Traders?

In other parts of the wider financial markets, stocks received a boost after Jerome Powell’s second term was confirmed. Later in the session on Monday, however, stocks slipped from intraday records. As a result, the S&P500 pushed to a new all-time session high but later tumbled and finished in the red.

Stocks have largely benefitted from Mr. Powell’s aggressive monetary policies. Low interest rates and extraordinary monetary support underpinned the economic rebound and the record high valuations of stocks.

What to Watch in the Markets?

On this note, the market is now watching how the US Federal Reserve will continue with its current policies. More precisely, traders expect the US central bank to announce tapering, or reducing, asset purchases by $15 billion a month. Since the pandemic, the Fed has been injecting as much as $120 billion in monthly bond-buying.

In addition, market participants expect the Federal Reserve to start discussions on raising the interest rates. This said, many traders flocked to the US dollar after it became clear Jerome Powell remains Fed chair.

With this in mind, the Federal Reserve is meeting for its regular gathering on Dec. 14-15.

What’s the Latest in Cryptocurrency?

The cryptocurrency market, meanwhile, is trading fairly flat early Tuesday. On Monday, crypto traders maintained a calm trading environment as they digested recent developments. Further, the recent dip in bitcoin and other major tokens served as an entry point for many.

In other words, the slide in crypto prices prompted many traders on the sideline to step in and buy into the crypto market.

That said, crypto backers remain firm in their positive outlook for digital assets. While bitcoin presently hovers near $57,000, analysts say a new all-time high could come before year-end.

Economic Data Coming Up Today (EST times)

Today, traders and investors will watch for the latest PMI data from the UK, slated for release at 04:30 am. Next, at 08:00 pm, the Reserve Bank of New Zealand will announce its interest rate decision followed by a rate statement.

Later, at 09:00 pm, the New Zealand central bank will hold a press conference. The event could create increased volatility in the currency space, especially New Zealand dollar pairs.


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