EUR/USD gains strength following remarks from the Federal Reserve chair.
The primary currency pair outperformed yesterday's levels on Friday. The current EUR/USD exchange rate is at 1.0575.
The US released data on existing home sales for September, revealing a decrease to 3.96 million from the previous 4.04 million. Although the forecast was somewhat bleak, predicting a drop to 3.89 million homes due to high borrowing costs.
Initial jobless claims in the US declined to 198,000, down from the previous week's 209,000. However, the improved employment market is now viewed with caution as it's seen as a contributing factor to inflation.
Federal Reserve Chair Jerome Powell delivered a clear message in a speech yesterday: a robust economy demands a stringent monetary policy. Any further signs of the economy outpacing its natural growth rate could prompt additional tightening of monetary policy.
As previously mentioned, the Fed's strategy may involve substantial tightening. Achieving a return to 2% inflation will likely require a period of economic growth below its potential, along with localized easing of labor market conditions.
The fact that the economy is still robust and growing above its potential has surprised the Fed.
In summary, Powell's stance on monetary policy appears quite assertive. The potential for tighter policies supports the US dollar, but the market remains uncertain.
By the way, this was the Fed's final official speech before the November meeting.