- EUR / USD reversed direction after testing 1.1900 on Thursday.
- FOMC Chairman Powell’s remarks triggered sharp swings in DXY.
- US data showed the economy contracted 31.7% in the second quarter.
EUR / USD jumped to a new weekly high of 1.1899 early in the US session, but staged a sharp turn and fell into negative territory. At the time of writing, the pair was down 0.35% on a daily basis to 1.1788.
DXY Moves Into Positive Territory Above 93.00
In his much-anticipated speech at the Jackson Hole Symposium, FOMC Chairman Jerome Powell announced that the Fed would adopt an average inflation target as part of its new policy strategy. Although the initial backlash put strong selling pressure on the US dollar, Powell’s additional comments gave the currency a boost.
Powell noted that the Fed would not bind to a particular method of defining average inflation and added that any inflation overrun should be moderate. The US dollar index, which fell to a low of 92.42, was last seen rising 0.35% on the day to 93.22. A strong rally in yields on US Treasuries appears to be helping the greenback maintain its strength. For now, the 10-year benchmark is up nearly 7% on the day.
Meanwhile, the U.S. Bureau of Economic Analysis, in its second estimate, said the economy contracted 31.7% in the second quarter. This reading is better than the previous estimate of 32.9% and market expectations of 32.5%.
Later in the session, European Central Bank (ECB) chief economist Philip Lane will also speak at the Jackson Hole summit.