On Thursday, the attention of the markets was focused again to the speech of Jerome Powell in the Banking Committee of the Senate. He expected new details related to the prospects for raising interest rates.

Powell spoke a lot about the growth of the economy, the need to increase productivity, and also touched on the subject of fiscal stimulus including the impact of rising wages on inflation. However, he also said that he does not yet see the risk of overheating of the economy and a noticeable effect of wages on inflation. He also confirmed that the interest rate increase will be gradual, but in the end, the direct question of how much one can expect rate increases this year. The head of the American regulator identified the factors that, in his opinion, will be in the focus of the Fed.

These topics are mentioned on his speech: a strong increase in the labor market increased price pressure in the context of rising wages, improved prospects for growth in the world economy, and support for tax cuts and increased government spending to increase GDP. In fact, the head of the Federal Reserve has identified benchmarks for assessing the prospects for raising interest rates.

It can almost be said that Powell confirmed the tone of his "hard" statement made on Tuesday.

On this wave, the U.S. dollar received a good support, virtually not responding to the published positive data on income and expenditure of individuals in the US, as well as, the values of the basic price index for personal consumption (RFE).

However, the continuous rally of the dollar was suspended by a sharp drop in the yield of government bonds of the U.S. Treasury due to news that the administration of Donald Trump decided to increase duties on the import of aluminum and steel into the States. This has raised fears that the US is entering an economic war and engaged in protectionism that could put pressure on GDP growth and inflate inflation. Theoretically, the dollar was supposed to grow on this news, but it was under pressure due to new fears, which in recent years have negatively affected its course.

Forecast of the day:

The EUR/USD pair is trading above the level of 1.2250. Despite the local growth, there is no prospect to continue since the Federal Reserve will further raise interest rates while the ECB will hamper the process of exit from incentive measures against the backdrop of falling inflationary pressures. We believe that the pair should be sold after its decline below the mark of 1.2250 with a target of 1.2100.