The dollar falls as Jerome Powell confirms the US is a significant way off tapering

The dollar falls as Jerome Powell confirms the US is a significant way off tapering

The dollar sank yesterday afternoon during the FOMC press conference as Chairman Powell signaled Fed cutback on bond purchases may be later than markets had anticipated. Dollar losses continue this morning as equity markets march higher especially in China where authorities say Chinese companies are OK to continue to seek public listings in the United States. US GDP numbers and Jobless claims both came in worse than expected adding to dollar losses.

“Someone is sitting in the shade today because someone planted a tree a long time ago.”  

Warren Buffett
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    July 29, 2021

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    The US economy grew at 6.5% in Q2 vs. the consensus forecast of 8.4% and Q1’s 6.3%. Jobless claims came in at 400K vs. the consensus of 385K. The dollar sank on the news.  

    Yesterday’s FOMC meeting saw Jerome Powell declaring “progress” has been made towards employment and inflation goal. However, Powell confirmed that any tapering would require further improvements in the economy and that the central bank is “a ways away” from seeing this.


    Sterling surged overnight and this morning to reach 4-month highs against the euro and one-month highs against the dollar. The re-opening of the UK economy last week has yet to spark a surge in hospitalizations or cases. The pound has been the biggest G-10 gainer against the dollar last week, climbing 2.6%.


    The euro is stronger on overall dollar weakness and a higher than expected July inflation figure for Germany. Risk-on sentiment with higher equity prices is hurting the dollar and helping investors regain confidence in equities and commodities.


    The Canadian dollar has gained 2.5% vs. the US dollar over the past couple weeks as risk sentiment turns positive and US economic data disappoints.  The price of oil is slightly higher this morning as commodity prices, which are priced in dollars, move higher as the greenback weakens.


    The Australian central bank is now expected to delay tapering of its bond buying program, announced only 4 weeks ago as prolonged lockdowns delay any further economic recovery. The A-dollar is stronger none the less on overall US dollar weakness.

    Authorities in China will allow domestic companies to IPO in the US provided they meet listing requirements. The renminbi gained back 1% vs. the US dollar after last week’s news that China is turning publicly traded education companies into non-profits.

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Peter Compton
Peter Compton

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