Dollar Drops in Forex Markets as Powell Enters Debate Again

The US Federal Reserve boss Jerome Powell caused more problems for the dollar yesterday after he signalled again that there was a chance the central bank would hold off on interest rate rises in 2019.

Powell said that the bank could choose to be “patient” if less than satisfactory economic performance data came out of the country in the coming year.

With markets now working on the assumption that there could well be no more 2019 rate hikes, the views of the Fed boss are now considered to be clear.

However, the dollar suffered as a result of this development. The dollar index, which tracks the greenback’s performance in relation to other major global currencies, dropped to 95.5 – meaning that it has now gone down 2.2% or so since the middle of last month.

The USD/JPY pair also did well, with the Japanese yen going up 0.1% to be worth 108.32 per dollar. The euro performed similarly, rising 0.1% to $1.1502.

Despite ongoing worries over whether or not the British government will be able to pass a Brexit deal next week, the pound went up ever so slightly to $1.2752 against the US dollar.

With the Christmas break now well in the past and the first full week of post-holiday forex trading over, there’s plenty on the economic calendar for next week.

Monday sees a range of Chinese data releases due out at some point in the day, including imports and exports as well as trade balance information.

European industrial production figures for November will be out at 10am GMT, while business confidence figures for New Zealand covering the fourth quarter of the year are expected at 9pm GMT.

On Tuesday, the British Parliament will make its long-awaited vote on Prime Minister Theresa May’s Brexit deal. It is currently unclear whether May will manage to win this vote, with a loss for her likely to increase the chances of a no-deal Brexit.

French consumer price index data for December will be out at 7.45am GMT. This is expected to drop from 0.1% to -0.2% month on month.

The American producer price index for January is expected at 1.30pm GMT. Month on month, this is expected to move from 0.1% to -0.1%.

Japanese machinery orders information covering November is expected at 11.50pm GMT. This was last recorded at 7.6%.

Looking ahead to Wednesday, a significant German data release is expected at 7am GMT. The harmonised index of consumer prices covering December is expected to remain steady at 1.7%.

British core consumer price index information for December is due at 9.30am GMT and is expected to have a similar outcome. It was last recorded at 1.8%, where it is expected to stay.

At 1.30pm GMT, American retail sales information, excluding automobiles, for December is out. This is expected to also remain steady month on month, this time at 0.2%.

The day will be rounded off by the release of the US Federal Reserve’s Beige Book report, which is due at 7pm GMT. This reveals insights into the American economy compiled through interviews with sources in each Fed district across the country.