Dollar struggles after dovish tone from FED chair Jerome Powell
On Wednesday the dollar continued to struggle in early trading after dovish comments from the fed chair Jerome Powell raising fears of rising inflation. The comments helped to push the USD to multi year lows against the sterling and commodity linked currencies.
Powell confirmed that interest rates will remain low whilst the Fed continues to buy government bonds to support the US economy. This continued commitment to bond buying has investors worried that inflation could spiral out of control with further stimulus also coming from the new administration.
There was some positive news out of the US however with a report suggesting U.S. retail sales could rise as much as 8.2% to more than $4.33 trillion this year as more people get the COVID-19 vaccine and the economy reopens. This was reported by the National Retail Federation on Wednesday.
U.S. retail sales are expected to rise between 6.5% and 8.2% in 2021, the NRF said. The expected stimulus coming from the Biden administration which includes a $1,400 check to households should strengthen retail sales figures in coming months.
The pound continues to be buoyed by the vaccine rollout with over 18million people now having received their first dose.
The pound touched new highs against the EUR and USD and should remain supported as long as the BOE continues to shun the idea of negative interest rates and the vaccine program stays on target.
The pound however dipped briefly after England's deputy chief medical officer Professor Jonathan Van-Tam said it "will take a few months" before vaccine manufacturers are able to produce doses in a "steady routine", adding that "global supply restraints" have also hampered the UK's vaccine rollout. Sterling lost around half cent initially as the comments were made and shows that any disruptions to the vaccine supply could see the pound fall back.
US Prelim GDP q/q 1.30pm
US unemployment claims 1.30pm
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