The US currency is fluctuating again – rising and falling following the Fed's comments. On Wednesday evening, the national currency declined after the news about the continuation of the previous Fed policy.
After the meeting, the regulator left the interest rate unchanged at 0-0.25% per annum. Fed Chairman, Jerome Powell, stated that the department will support the recovery of the national economy to minimize the negative impact of COVID-19. At the same time, he noted an increase in economic activity and employment indicators due to the active vaccination of the population against coronavirus and the introduction of incentive measures from the state.
However, representatives of the regulator confirmed the need for "further progress" in terms of maximum employment of the population and achieving the target inflation rate of 2%. Given the combination of these conditions, the Fed stressed that it is possible to reduce the pace of bond purchases. However, these goals are now difficult to achieve, so the regulator will continue the program of asset repurchases in the amount of $120 billion per month.
The current situation left almost no chance for the US dollar. On the evening of April 28, the specified currency slightly fell after the announcement of the results of the Fed meeting. By Thursday, experts say that the decline continued. This morning started with the EUR/USD pair trading around the level of 1.2129, trying to reach new peaks. It should be noted that the main currency pair managed to break through the level of 1.2055, to which it returned throughout yesterday.
A lot of analysts assume that the dollar will rise by the beginning of the new week, drawing attention to the significant divergence in the US and European economies. According to experts, the US economy is recovering at a faster pace than the Euro area economy. At the same time, economists call the ECB the "main printing press of the world", and not the Fed. It can be recalled that the balance of the Eurobank increased from €5.4 billion to €7.5 billion for the past year, and the balance of the Fed did from $6.6 billion to $7.8 billion. Based on current calculations, the ECB's balance sheet rose by 38%, while the Fed's balance sheet only did so by 18%. As a result, the ECB printed money (euros) much faster and in a larger volume than the Fed (dollars).
In the long run, the current situation is expected to be controlled by the US currency. The tightening of monetary policy on the part of the US regulator may play against the euro, if it starts it before the European agency. An earlier interest rate hike by the Fed compared to similar actions by the ECB will also worsen the position of the Euro currency. In this case, experts highlighted that this will help the dollar to increase and strengthen its potential in the near future.
The US economy has been gaining impulse for the last few months, which is positively reflected in the dynamics of the USD. This allows the national currency to rise after another decline. According to analysts, the dollar has a major battle ahead for leadership in the global financial market, which will be decisive. At the moment, it has lost the battle, but not a war, and the battle for the dominant positions may be successful.