At the second testimony on Wednesday, Jerome Powell as the Fed’s leader talked about the issue of the dollar in the digital form. He said that an authorization could be required by the central bank in developing and implementing that digital USD.
The Fed hoped that this year can be the essential time to develop that new plan. Besides the US Central Bank, other governments and monetary authorities in the universe are now trying to develop their flat digital currency.
This situation is done as a response to the alternative currency growth such as Bitcoin which is really fast. Powell said that the Fed will consider the policy and technique which are quite challenging due to the digital version of Dollar.
The Action must Be Done Carefully
For your information, the status of the Dollar is now still the reserve currency. That is why; The Fed will be done everything carefully so that their decision does not damage the main market for which most of the assets there are denominated in USD.
Meanwhile, the US dollar didn’t give any response due to the testimony from The Fed leader on the second day. The market was still absorbing the dovish statement by Powell yesterday. The Central Bank will not do any tapering although the US economy is recovered.
Powell said that the American interest rate will be maintained at a low level. His organization would still buy bonds to support the economy. That commitment made investors worry. It is especially about inflation and the addition of fiscal stimulus by the Biden government.
The index of the Dollar slightly increased to a low level for three days. It was sold in 90.20 followed by Powell’s statement. The weakened USD is the most striking thing compared to the commodity currency such as the Australian dollar which is increasing in line with inflation.
The Market Focus is Further
Nowadays, the market’s focus is far from the point where Powell speaks. That was said by an analyst. The market is more focused on inflation and reflation as well. That is although Powell is more concentrated on the US economy and employment condition.
The Fed’s leader talked to the American Congress that his party will not consider the Quantitative Easing (tapering) cut or the increase of interest rate in the future. He adds the USA GDP Forecast for the year 2021 to at least 6%.
However, that thing is not enough to become an argument. It is especially to tight the monetary policy. He was even claimed that there were not any substantial signs of progress to the target of the Central Bank. That is why; The Fed still on its decision.
They continue to set loose monetary policy. That commitment becomes a sign that the Fed’s interest rate will still between 0.0 – 0.2.5 percent until many years ahead. The Central Bank continues to manage the super low-interest rate until the economic condition recovered.
Currency Pair Progress after Powell’s Statement
The USD/JPY got into the lowest level in 104.92 after a statement given by Powell. However, its position is now stronger to 105.50 levels. The most profitable currency is the Pound sterling. The momentum of GBP/USD faded after the release of UK employment data yesterday.
However, then it is significantly increased and noted its highest record. The Kiwi dollar also takes a chance to do more rallies from 0.5% versus USD. It is because the announcement made by the New Zealand Central Bank this morning was not dovish like Powell.
Vice versa, the EUR/USD is in a flat condition. The ECB President, Christine Lagarde, lately said that she is paying attention to the yield increase. That makes people worry that the European Central Bank will intervene in bond yields and euro exchange rates.
