Is the US dollar rally over?

Financial and commodity markets analytics

The US dollar’s bullrun may be finally coming to and end after comments from the US Federal Reserve president Jerome Powell that the US central bank may take a more cautious approach with regards to raising interest rates.

As early as last month, the Fed President was upbeat about the state of the US economy which lead investors to believe that more rate hikes were on the way in 2019 but comments today left the market wondering just how many rate hikes were in store or any at all.

Powell’s talk to the American Economic Association were the trigger for the scepticism

"We will be patient as we watch to see how the economy evolves," Powell said

Even a solid Non Farm payrolls report, which smashed expectations failed to aid the dollar which was also a worrying sign

"I think he Powell was not as forceful as some people, myself included, expected him to be. That is what took a bit of the wind out of the sails of the dollar, especially after a somewhat solid nonfarm payroll report," said Alfonso Esparza, senior currency analyst at OANDA in Toronto.

After the comments the greenback was sold off heavily against the major currencies and only time will tell if it is temporary or maybe the start of something bigger.

"Powell's comments that the Fed is prepared to alter policy expectations quickly and flexibly are weighing on the U.S. dollar and giving risk sentiment a boost," said Eric Viloria, FX strategist at Credit Agricole in New York.

"Overall, Powell’s tone is cautious which is contributing to U.S. dollar softness," he said.


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