Dollar Strengthened After Powell Ruled Out Negative Interest Rates

Fed Chairman Powell remained cautious on the economy but ruled out negative interest rates. Long USD/JPY?

Federal Reserve Chairman Jay Powell gave a dire warning yesterday that the US economy could be stuck in a painful multiyear recession if Congress does not dish out more stimulus packages.

In comparison to Powell’s outlook, President Trump is optimistic that the economy will see a dramatic recovery at the end of this year and rebound with more momentum in 2021.

Powell also raised concerns about long-term economic harm and warned that the outlook is uncertain with downside risks.

The main focus of Powell’s speech was regarding the fed-funds rate pricing in negative interest rates in April 2021 last week. Powell addressed the matter and said that the Fed has no intention to cut rates to negative for now.

We believe that this should calm the markets as rates will not move into negative territory.

USD/JPY could head higher as the dollar will continue to hold its safe-haven status with negative rates out of the way.

USD/JPY could find support at the 106.60 price level and head higher towards 107.80.

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