Fed Backs Stock Buyers and Returns Pressure on the Dollar

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Cautious demand for risky assets is returning to global markets after reassurances from Fed members, dampening inflation fears. Key indices in the US and beyond are clinging to a bullish trend. Last night we saw rising demand near important support levels, which remains in place on Friday morning.

In turn, the dollars recovery has stalled, and it is losing slightly this morning. Assurances of continued soft monetary policy and tolerance of higher inflation piles pressure on the dollar as markets will look for ways to preserve capital from depreciation due to inflation.

As one would expect, Fed member Christopher Waller explained to markets that the surge was due to transitionary factors, tolerating recent price rises above the Feds 2 target. This fits in very nicely with the updated strategy formalising the tolerance of higher inflation after crises.

We previously talked about the temporary nature of inflation, pointing out that its driver was a surge in used car prices and transport services. While overall inflation figures may have spooked retail investors, funds and professional players used the drop to buy.

The DXY, the dollar index to a basket of the worlds six most popular currencies, is losing 0.2 to 90.50 on Friday but remains 0.5 above the lows of the week when the latest selloff in equity markets kicked off.

On the technical analysis side, traders should look out for a retest of the 8990 area in the coming days, this years low. A drop below would be the…

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