The upcoming House vote on Joe Biden’s $1.9-trillion stimulus bill could add to the selling pressure surrounding the greenback
The US dollar index stays depressed around 90.00 following Powell’s appearance before the Congress on Tuesday. The Federal Reserve chair sounded dovish as he reiterated that the central bank will maintain loose monetary policy conditions until substantial further progress has been made towards achieving its two mandated goals – employment and inflation.
Furthermore, bullish attempts in the buck will likely be short-lived and modest in the short- to medium-term due to a combination of the accommodative stance from the Fed, extra fiscal stimulus, and the improving outlook for the economic recovery that underpins risk sentiment globally.
In the immediate term, Powell’s second testimony, this time before the House Financial Services Committee, could negatively affect the greenback later today. The upcoming House vote on Joe Biden’s $1.9-trillion stimulus bill due on Friday could add to the selling pressure surrounding the dollar.
Still, the euro may fail to take advantage of dollar weakness as an extended lockdown in Germany and a delay in vaccine deliveries to Europe could weigh on the common currency. EURUSD regained a bullish bias on Wednesday following the recent retreat but still lacks the momentum to make a decisive break above the 1.2200 immediate barrier. The longer the pair stays below this figure, the higher the risk of a broader downside correction will become.
Elsewhere, USDJPY spiked strongly on Wednesday, extending the recovery from mid-February lows seen yesterday just below the 105.00 figure. The pair surged to 105.75 in recent trading while retaining a strong bullish tone during the European hours. Still, the greenback could struggle to see further gains in the short term as the pair would need an extra catalyst to overcome the 106.00 barrier. Later in the day, MBA’s mortgage applications and new home sales data could affect short-term dynamics in the USD.