Fed Warnings Continue While Trump Mulls Fresh Stimulus

<p>Fed watchers have been treated to plenty of interesting commentary this week which has been worth paying attention to, especially considering the movements we’ve been seeing in the dollar and in equities markets. With the US economy having suffered a record crash over Q2, the outlook among Fed members has become increasingly uncertain and with reports now suggesting that the country is at risk of a second wave of the virus, the guidance has become even more sobering.</p>
<h2>Powell Calls On More Government Support</h2>
<p>In a testimony made to the US House of Representatives this week by video link, Fed chairman Powell called on the need for further fiscal support from the us government saying: “We at the Fed need to keep our foot on the gas until we are really sure we are through this, and that’s our intention, and I think you may find that there’s more for you to do as well. It would be a concern if Congress were to pull back on the support that it’s providing, too quickly.”</p>
<p>These comments come just a week after the fed chairman warned markets that the US economy faces a long road back to recovery. Speaking at the June FOMC meeting, Powell said that despite some recent positive data (namely the bumper US jobs report for May), the economic damage caused by the COVID-19 crisis will be long lasting and as such, Powell expects rates to stay on hold until at least 2022. The Fed now projects US GDP to contract by 6.5% over the year as a whole.</p>
<h2>Meester Warns of Long Recovery Process</h2>
<p>Powell’s comments regarding the long last implications from the virus and the long road to recovery were echoed by Fed’s Meester this week. In a speech given to the Council for Economic Education in New York, Meester explained that she expects the u economy to recover some over the next month but went on to say that “after that, I believe it will take quite some time for economic activity and job levels to approach more normal levels.” Elaborating on her point, Meester went on to say: “The shape of the recovery will depend on the path of the virus and our ability to handle its spread through testing, contact tracing, treatment and risk-focused restrictions on activity. It will also depend on the behaviour of households and businesses and how comfortable they feel in re-engaging in economic activity.”</p>
<h2>Trump Considering Further Stimulus</h2>
<p>The market now waits with bated breath to learn the details (should the plan materialise) of Trumps proposed “phase 4” stimulus package. Trump announced this week that his team are working on a new package and <a href="https://www.bloomberg.com/news/articles/2020-06-16/trump-team-weighs-1-trillion-for-infrastructure-to-spur-economy" target="_blank" rel="noopener noreferrer">reports</a> have cited sources claiming Trump is considering a $1 trillion infrastructure package as part of the proposal which might also include further cash payments to families impacted by the virus disruption.</p>
<h2>Technical Views</h2>
<p><strong>DXY (Bearish below $97.05)</strong></p>
<p>From a technical viewpoint. The Dollar Index completed the symmetry projection into the $95.99 level which saw a strong bid. However, the move has been capped by selling pressure on a retest of the yearly pivot at $97.05. While this level holds, the near-term bias remains bullish with price vulnerable to a further drop down to the yearly S1 at $94.50 unless it clears back above above the pivot.</p>
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