ZFX: Bearish outlook of the greenback amid dovish Fed signals expectation

On Thursday, Asian stock markets were mixed as investors is waiting for hints from Fed Chairman Powell regarding the policy framework and inflation target.

Stepping into European trading session, stock markets are still no clear direction, losing the positive momentum overnight. The Nasdaq and the S&P made another record high on Wednesday due to the outperformed figures of the US durable goods orders.

The markets believe that the Fed will set the inflation like an average range, meaning that the Fed would accept a higher or lower inflation rate for a period of time. Any remarks made by Fed Chairman Powell in this two-day “online” annual meeting, will be treated as a guideline for the September FOMC meeting. That’s why investors may see this annual meeting as a key risk event.

Generally speaking, the changes of the inflation target are considered as a dovish signal, and it is believed that the outlook for the dollar will be bearish. During the Asian session on Thursday, the dollar index failed to approach 93 level.

In addition, the Trump’s administration may not be able to launch the massive economic stimulus package in the short term as the White House officials said that so far no timetable is ready. It is reported that Republican lawmakers are preparing a smaller plan, including those terms with consensus between the two parties, with a scale of about US$500 billion.