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Dollar falls with equity market rise

USD - United States Dollar

The Dow Jones Industrial Average stopped just short of 32,000 yesterday for the first time after Federal Reserve Chairman Jerome Powell’s comments. During his testimony to Congress, Powell said that fiscal policy would continue in the short term, that inflation was not impacting policies and that the value of the dollar was relatively stable.

As markets reached to new highs on the comments, the US dollar reached recent lows. EURUSD broke through 1.22 for the first time since the start of 2021. GBPUSD was steady above 1.41. USDCAD touched 1.25.

Key Movers

The euro struggled to break resistance at 1.2170 and again appears to be range-bound between 1.21 and 1.22 while Sterling continued its forward advance, touching 1.42 before edging lower through the latter stages of the daily session to rest marginally below 1.4150. Attentions remain with the reflation narrative.

There is no doubt about it, the pound is absolutely flying at the moment and continued to remain one of the top performing G10 currencies of the year. Yesterday, investors took stock of their returns with some profit-taking, which halted the pound’s advance for at least one day. Despite this, the pound remains very optimistic on the UK's vaccine rollout program and is also benefitting from a shift back towards risk in the market.

Global reflation expectations continued to steer direction through trade on Wednesday, forcing treasury yields higher and dragging the AUD through resistance at 0.7930. The AUD moved through 0.7950 overnight, marking fresh three-year highs at 0.7962 as it eyes a move toward and beyond 0.80 US cents. Commentary from Fed Chair Jerome Powell suggests the FOMC will maintain its current policy setting through the foreseeable future with expectations for inflation to remain below the 2% average for at least 3 years.

Expected Ranges

EUR/USD: 1.213 - 1.223 ▼

GBP/USD: 1.409 - 1.417 ▼

AUD/USD: 0.783 - 0.800 ▼

USD/CAD: 1.247 - 1.253 ▼