FED's Chair Jerome Powell. Image source: Official FED Photо
The Chair of the Federal Reserve Jerome Powell and the Treasury Secretary Steven Mnuchin testified before the House Financial Services Committee in Washington yesterday.
In his speech, Powell weighted on the effectiveness of the overall response to the coronavirus crisis that has been advanced so far by the FED and the US Government since the beginning of the pandemic.
" The crisis was met by swift and forceful policy action across the government, including the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). […] We have entered an important new phase and have done so sooner than expected. While this bounceback in economic activity is welcome, it also presents new challenges—notably, the need to keep the virus in check."
Powell's remarks are inlined with recent data suggesting a positive rebound in global economic activity. The initial shock from the coronavirus fallout has now been mostly negated, and the general economic recovery process has started.
However, FED's Chair also cautioned against the potential dangers that a second wave poses for the still-fragile economic development. The recently observed resurgence in newly confirmed cases means that the rate with which the virus is spreading in the US is not contained.
The pandemic continues to cast a shadow over the American economy, and it could offset the efficiency of FED's loose monetary policy coupled with the Government's comprehensive fiscal policy.
In other words, the two institution's combined efforts could be impeded if the healthcare crisis is allowed to persist, and indeed to accelerate.
Overall, Powell's statements have eased some of the demand for the US dollar and other safe-havens. This is happening as investors' fears, particularly in emerging markets, are now diminished compared to the early days of the crisis.
As can be seen on the 4H chart below, the euro has managed to suspend the advance of the greenback, and the EURUSD is currently consolidating within the boundaries of a very narrow range.
The pair is trading just below the minor resistance level at 1.12380, which has been able to hold back the bullish spikes for the last several days. The 23.6 per cent Fibonacci retracement level at 1.12706 is proving to be quite significant as well.
Nevertheless, the previous Markdown is now clearly terminated, which means that the market could gear up and attempt to head north. This will likely happen if the global demand for the greenback continues to wane.
EURUSD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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