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EUR/USD Update – Fed’s Powell Sees Accommodative Policy for ‘Quite Some Time’



Good day forex traders and readers.

As we head into mid week, the EUR/USD remains pressured by bearish sentiments. The currency pair is now testing the support region of 1.2980 and should this fail, we may be looking at an extended bearish target of 1.2780. Having said so, as the US Non-Farm Payroll is due this week, we may see unusual trading activities and hence do have proper money management.

In the meanwhile, the Bloomberg article below highlights that US Federal Reserve officials continue to do damage control with regards to Ben Bernanke quantitative easing tapering comments.

Federal Reserve Governor Jerome Powell, who has never dissented from a policy decision, said monetary policy will remain accommodative “for quite some time,” with below-target inflation and unemployment “well above” the longer-term normal level.

“The case for continued support for our economy from monetary policy remains strong,” Powell said today in the text of prepared remarks in New York .

Powell said “our private sector shows real signs of underlying improvement,” echoing a view expressed earlier today by New York Fed President William C. Dudley, who said he sees “persuasive evidence of improved underlying fundamentals for much of the private sector.” Both central bankers mentioned stronger automobile and housing demand.

The policy-setting Federal Open Market Committee affirmed its plan on June 19 to keep buying $85 billion per month in mortgage-backed securities and Treasuries. Chairman Ben S. Bernanke said in a press conference following the FOMC meeting that, should the economy continue to improve in line with its forecast, the Fed could begin trimming its purchases later this year and end the program altogether in mid-2014.

A “strongly” recovering housing market is a basis “to hope for the kind of self-reinforcing cycle of economic growth that we have been waiting to see,” Powell said. “I expect that inflation will return gradually to our 2 percent objective, and that we will continue to make progress in reducing unemployment.” Stocks Fall

The Standard & Poor’s 500 Index fell 0.1 percent today to 1,614.08, while the yield on 10-year Treasury notes slipped 0.01 percentage point to 2.47 percent.

The FOMC reiterated last month that it expects to keep interest rates near zero as long as unemployment is above 6.5 percent and inflation doesn’t exceed 2.5 percent. The Fed has kept its benchmark borrowing cost near zero since December 2008.

In his […]

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