U.S. dollar hit high after Powell’s speech on Thursday

The U.S. dollar is surging towards a three-week high. This is occurring as stock markets weakened after Fed Chairman Jerome Powell spoke against negative interest rates. The currency climbed up by 0.2% to 100.37 against a basket of its rivals. It stood below a three-week high of 100.44 at last.

European stock markets fell by more than 1% on Thursday. U.S. stock futures also pointed to a third consecutive session of losses. As a result, investors returned to the relative safety of the dollar. U.S. President Donald Trump’s comments were one more reason for the greenback’s rally.

Trump stated that he supported a strong dollar. On the same day, Jerome Powell rejected the idea of using negative interest rates. However, Trump warned that the recovery could take some time as the recession is worse than any since World War Two.

Raffi Boyadjian, the senior investment analyst at XM, noted that investors have lost some of their optimism after Powell’s statements. The relaxation of various restrictions had generated expectations of a V-shaped recovery from the crisis caused by the coronavirus.

Powell urged more fiscal stimulus to support the economy. However, according to chief investment officer at UBS Global Wealth Management, Mark Haefele, the ongoing tensions between Democrats and Republicans suggested that additional stimulus is unlikely to materialize immediately.

What about the Australian dollar and the British pound?

The Australian dollar sharply declined after data showed unemployment increased by 594,300 in the country in April. It seems the economy needs more monetary and fiscal easing. The Aussie tumbled down by 0.3% to $0.6437 as the jobless rate rose to a five-year high.

Meanwhile, the pound plummeted below $1.22 for the first time in more than five weeks. Wednesday’s data showed Britain’s economy fell by a record of 5.8% in March as the coronavirus crisis escalated, causing the sterling’s decline as well.

Traders are awaiting data from the United States and Europe in the next two days for clues about the depth of the recession. The eurozone reports first-quarter GDP data is due on Friday, while U.S. initial jobless claims data will be released on Thursday.