The market responded positively to Powell's nomination to return to the position of Fed chair. The US dollar also strengthened due to expectations of a Fed rate hike in the second half of 2022.
The US dollar continued its bullish trend against major currencies on Tuesday (23/November) after President Biden again appointed Jerome Powell to lead the Fed.
The US Dollar Index (DXY) is seen moving around 96.55 at the time of writing this news article, the highest since July 2020.
Against the euro, the US dollar was firm at a 16-month high. This currency also excels against the Commodity Dollar trio, particularly the Canadian Dollar which is currently facing pressure from falling oil prices.
EUR/USD is still stuck in the 1.125 area, while USD/CAD is bullish at the 1.27 area.
The increasingly optimistic movement of the US Dollar now reflects the positive response of market participants to Powell's leadership in the second period.
They expect that the Fed's policy outlook will not change and the prospect of a faster rate hike can be realized soon.
In his official statement, President Biden said that he preferred Powell over the other leading candidate, the more dovish Lael Brainard, to prevent new uncertainty over the Fed's monetary policy.
Biden believes Powell will bring the US economy to reach its target, especially to realize the maximum labor market (Full Employment).
"The nomination of Powell as Fed chairman for a second term makes the market more comfortable in anticipating a rate hike in the second half of 2022… This view is reinforced by at least 3 Fed officials who are currently openly looking to accelerate the pace of tapering," said analysts at the Fed. Westpac in a note.
Atlanta Fed President Raphael Bostic confirmed his support for Powell's nomination.
Bostic clearly said that Biden's decision was very appropriate because it removed uncertainty.
If Lael Brainard becomes chairman of the Fed, the agenda that has been drawn up by Powell is likely to change, triggering new uncertainty.
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