EUR / USD is rising amid a weakening dollar, after Fed Chairman Jerome Powell changed his views on the relative neutral values of interest rates.
Yesterday morning, US dollar maintained its dominant market position. The European currency remained under pressure on weak statistics and high political uncertainty, while the dollar was optimistic about the publication of important statistics and the Fed's speech.
The first disappointment was the US data. Contrary to the expectations, GDP reassessment rate remained at 3.5%. Later data on the trade balance and sales of new housing were also below expectations.
Powell’s speech was generally quite optimistic, as the Fed chief once again noted the good condition of the American economy and the presence of a sufficient number of signals in favor of maintaining the current dynamics. But investors focused on Powell’s comments on the level of interest rates. In October, Fed chief noted that rates in the United States are still far from neutral values, when they no longer affect the dynamics of GDP. On Wednesday, unexpectedly for many, Powell has expressed a different point of view, noting that the level of interest rates in the US is only slightly below the neutral value. This phrase led to a sharp weakening of the dollar, as investors took it as a signal that the Fed could stop raising rates earlier than expected.