- Talks between the United States and Iran are likely to take place.
- Divergence in monetary policy is supporting EURUSD.
managed to close the gap formed at the market open on Monday, but is in no rush to rally. Investors prefer to wait for Iran's participation in talks with the United States and the outcome of those discussions. The ceasefire expires on April 21 and Donald Trump says an extension is unlikely. The head of the White House claims that the Americans continue to block the Strait of Hormuz and threaten Tehran with more bombings.
Meanwhile, American investors are bracing for Kevin Warsh's congressional hearings. The candidate for chairman of the Federal Reserve believes that the independence of the central bank is in its own hands. The president of the United States can comment on the decisions of the Federal Reserve, but cannot influence them. The candidate is in an extremely difficult position, as some Republicans have no intention of supporting his candidacy while the Jerome Powell investigation is ongoing.
Donald Trump has promised to remove him from the Committee at the end of his term on May 15 if a new nominee is not approved. The power struggle is casting a shadow over the US dollar. The turmoil could put pressure on the dollar, as could the resumption of talks on a cut in the federal funds rate.
Kevin Warsh has repeatedly referred to Alan Greenspan. Greenspan kept rates steady during his tenure as Federal Reserve chairman, while other central banks raised them. The reason was the increase in productivity driven by the Internet revolution. Artificial intelligence can also slow price growth, which would allow the Federal Reserve to pursue more accommodative monetary policy and put pressure on the dollar.
The euro was supported by a statement from Christine Lagarde, who said the ECB would raise rates more than expected if governments were too generous. They would provide significant help to households facing rising energy costs, but this could push eurozone inflation above 6%. In turn, this would force the European Central Bank to aggressively tighten its monetary policy, boosting the EURUSD by reducing the interest rate differential between the ECB and the Federal Reserve.
The FxPro Analyst Team
