The euro continued its corrective growth against the US dollar, just like the British pound did. Yesterday's speech by the Chairman of the Federal Reserve did not provide clarity on the regulator's future actions regarding interest rates. Jerome Powell spoke extensively about the economy's dependence on whether people understand the Federal Reserve's activities. In comments prepared for a meeting in Washington, Powell stated that when Fed representatives publish their forecasts for interest rates and the economy, one of their objectives was to influence spending and investment decisions this day and in the upcoming months.
The Fed Chairman did not comment on his forecasts for rates and the economy, which is quite unusual for his speeches. Notably, earlier this month, the regulator kept the target range for the base rate unchanged at 5.25–5.5%. Recent quarterly projections showed that 12 out of 19 officials supported a rate hike in 2023, highlighting the desire to further curb inflation. US central bank leaders anticipated fewer rate cuts in 2024 than previously expected, partly due to a stronger labor market.
Addressing educators during his speech, Powell said that they also conduct monetary policy through their teaching as they share knowledge that plays a crucial role in how the central bank fosters a healthy economy.
At the same time, Thomas Barkin, President of the Federal Reserve Bank of Richmond, gave an interview. He stated that policymakers had time to decide whether they needed to do more work to reduce inflation or if the current labor market position was sufficient to achieve set goals. " We have time to see if we've done enough, or whether there's more work to be done," Barkin said in his remarks prepared for an event in New York. "The path forward to me depends on whether we can convince ourselves inflationary pressures are behind us, or whether we see them persisting. I will be watching the labor market closely for those signals," he added.
The head of the Richmond Fed, who does not have a voting role on policy this year, said he supported the decision to keep rates unchanged this month. "Where will demand and inflation go from here? It's hard to know. I believe the labor market will be key to answering this question," Thomas Barkin explained. "For many employers, the labor market still feels out of balance" he concluded.
Regarding the technical picture of the EUR/USD, the euro continues to recover. To keep control, buyers should stay above 1.0610. Doing so could pave the way to 1.0645. From that level, there is potential to reach 1.0670, but achieving this without support from major players will be quite challenging. If the pair declines, significant actions from major buyers could be seen around 1.0570. If no one steps in at that level, it might be wise to wait for a new low of 1.0530 or to consider going long from 1.0490.
Meanwhile, pressure on the pound became smaller. A rise can only be expected after gaining control over 1.2250. Regaining this range will bring back hope for a recovery towards 1.2290, after which a sharper uptick to around 1.2330 can be anticipated. If the pair falls, bears will attempt to take control of 1.2200. If they succeed, a breakout of this range will affect bulls' positions, pushing GBP/USD towards a low of 1.2160 with the potential to touch 1.2110.
