The chairman of the Federal Reserve in the US is currently holding a two-day session before the US Congress, and reporting on the central bank's current economic outlook. Many financial analysts would be observing the proceedings and would be examining Powell’s commentaries, in anticipation of any hints in regards to potential federal rate cuts before July’s pivotal FOMC meeting.
With the nearing of the presidential election next year, Donald Trump has urged the FED to lower the interest rate on multiple occasions, so that the dollar can depreciate, which according to Trump should make American products more competitive on the international markets.
Given the expected interest rate cut by the ECB in two weeks, the EUR is subsequently anticipated to depreciate, which would indirectly disadvantage American exporters, as the prices of European products become more favourable. This is the prime reason why Trump has criticised the ECB of practising deliberate and unfair currency war against the US, but Jerome Powell has thus far been able to dismiss the political agenda of the President from interfering with the FED's underlying monetary goals.
If Powell hints at a possible rate cut in July, analysts will take it as an indication that the FOMC is finally yielding to Trump's demands, which, however, might result in a premature intervention and a subsequent damaging effect for the US growth, especially given the strong NFP report from last week. On the other hand, if Powell dismisses once again the possibility of a rate cut by the end of 2019, it would likely spark further criticisms from the President and possibly threaten Powell's position on the Board of Directors.
The US currency dollar index has neared the major resistance level of 97.64, as the market braces for today’s conclusion of the two-day session before Congress.