Dollar fell on Wednesday to the maximum in a month after the statement of the head of the Federal Reserve Powell about the temporary nature of inflation in the United States.
Inflation will remain high in the coming months, and then it will decrease, it was noted in the previously published theses of Powell's speech to the US Congress. High inflation is temporarily supported by the effects of a low base associated with the coronavirus pandemic.
According to the head of the Fed, the US labor market and the economy are still far from the progress that the Fed wants to see before reducing support for the economy. The labor market is 7.5 million jobs below the pre-pandemic level.
Powell has not retreated from his positions, which he has voiced at least since the beginning of the year. At the congressional hearings, he repeated the mantra about the short-term and temporary nature of inflation and that the Fed is far from starting to curtail emergency measures to support the economy.
The head of the Fed promised to warn in advance about the regulator's intention to make a decision on curtailing asset purchases.
At the last Fed meeting, some FOMC members expressed concern about rising inflation and confidence in an earlier rate hike than previously expected.
The comments of the head of the Fed came just in time to turn the situation around for the dollar. DXY is rolling back from the 92.80 mark for the second time in a month and has a high chance of starting the path to the lower limit of the trading range at 89.20–89.60.
The unambiguity of Powell's comments sets up that we will hear concrete plans for curtailing QE no earlier than the symposium in Jackson Hole on August 26-28.