It was no surprise that the Federal Reserve System left all parameters of its monetary policy unchanged, which many have been waiting for. In addition, Jerome Powell did not say anything new during the following press conference. The Fed Chairman pretended that there was no Biden's plan to support the US economy, which is more like a usual populism than real aid. And given the fact that such rhetoric of the regulator is currently equivalent to tightening monetary policy, it is not surprising that the dollar has strengthened its position. The indicated currency started to grow much earlier, but then it stopped after the FOMC meeting. Therefore, the driving force yesterday was something else.
We are talking about the vaccine against coronavirus. But in Europe, the right thing should be discussed is the failure of this vaccine. Yesterday afternoon, it became known that the European Union could not get pharmaceutical companies to guarantee the supply of the required number of doses of vaccine within the specified time frame. In other words, the vaccination program will be prolonged and difficult. The UK has a similar scenario. But this should have been a strengthening factor, which would have made the dollar even stronger. Here, it should be recalled that the vaccination program in the United States is being implemented much more slowly than planned. In this case, Jerome Powell slightly talked about the coronavirus in the sense that the economic recovery depends on the pace of vaccination. Thus, the Fed did its part to stop the US dollar from strengthening.
As an additional illustration of Jerome Powell's words, the first estimate of US GDP for the fourth quarter is released today. The economy is expected to grow 4.2% in the last three months of 2020. On the one hand, this is quite a good result, that is, if you do not take into account the fact that the situation now is somewhat unusual – the economy has been hit hard by the coronavirus pandemic and various restrictive measures. And based on the speech of the Fed's head, it clearly tells us that further growth will be even slower due to the slow implementation of the vaccination program.
Therefore, the GDP data will not be decisive, but will only smoothen the negativity presented by the applications data for unemployment benefits. These are much more important, since they directly indicate the dynamics of economic recovery. However, its forecasts are purely negative, as the number of repeated applications may rise from 5,054 thousand to 5,250 thousand. This suggests that unemployment, which is already quite high, is becoming more lengthy. This is also not compensated by the expected decline in the number of initial requests from 900 thousand to 875 thousand.
Repeated Unemployment Insurance Claims (United States):
After showing an active downward interest, the EUR/USD pair found a pivot point in the area of 1.2050/1.2060, where the volume of short positions declined, followed by a rebound. We can assume that the quote will continue to follow the pullback pattern, focusing on the levels of 1.2080/1.2130.
The GBP/USD pair has moved away from the local high of the mid-term trend again, which resulted in a decline towards the level of 1.3650. To continue the downward trend, the quote needs to consolidate below 1.3650 in an H4 time frame, which will open the way to 1.3600. Otherwise, the quote will continue to follow the high of the local trend.
