• Fed expected growth surge in the next two years but no rate hikes, as Powell hammers dovish message
• NZDUSD slightly lower as New Zealand posted contracted GDP data
• AUDUSD gains significantly on impressive job report
Fed Chair Jerome Powell stressed on Wednesday that the central bank will not raise the rates until the US economy shows material evidence that it is heading towards full recovery. By making such statement, he has abandoned the traditional method to pre-emptively change monetary policies against inflation. It has been widely viewed as the Fed’s new framework which started last year. “Until we give a signal, you can assume we are not there yet,” said by Powell after the Fed decided to hold rates near zero at least through 2023. Fed officials expect 2021 to produce 6.5% GDP growth from massive fiscal stimulus and successful vaccination. As a result of the meeting, USD slumped on Wednesday but quickly recovered on Thursday morning in Asia, currently trading at 91.52 at press time.
Other central banks news this week include Bank of England’s expected move to leave the rate at 0.1% and the bond-purchasing program unchanged. Moreover, Bank of Japan will deliver its policy decision on Friday.
NZDUSD slightly lower today, as New Zealand’s GDP gave market a surprise contraction of 1.0% on a QoQ basis in 2020Q4, versus the forecast at +0.1%. Moreover, annual GDP fell by 0.9%, compared to the forecast of a 0.5% rise.
On the other hand, AUD gained significantly in the past two days given a surprisingly impressive job report. In February, Australia added 88.7k jobs, versus the expectation of 30k. All of the gains are from the full-time sector, as part-time decreased by 0.5k. The country’s unemployment rate also edged down to 5.8% from a prior release of 6.3%; participation rate has been held steadily at 66.1%. However, it should be noted that Australia’s wage subsidy program is set to expire by the end of this month, and this will potentially bring a temporary pause in the labor market.