Gold Beats Bitcoin as Fed Chair Powell Finalizes Dovish Pivot

Jeannie Matthews
July 12, 2019

Powell said the Fed stands ready to "act as appropriate" to support record usa economic growth now under threat.

Trump, who is counting on a strong economy as he heads into a re-election campaign, has called the Fed his biggest threat.

In a series of comments and tweets the U.S. president has accused the Fed of unnecessarily slowing the economy by not cutting rates.

The Pound Euro (GBP/EUR) exchange rate remained mostly rangebound throughout Wednesday's session after the European Commission released its summer economic forecast.

Powell, chosen by Trump to run the Fed but now out of his good graces, has worked hard to build relations among lawmakers, and even on a Democratic-controlled committee won plaudits and encouragement to stay on the job. "But the Fed tends to operate on trends, not data points". But later, in the question-and-answer period, several Democratic committee members offered support for Powell's leadership and a rejection of Trump's criticism. The Federal Reserve Act allows for Fed governors to be removed - but only "for cause" and not policy differences.

The congresswoman, a relentless Trump critic, also stated that "the president doesn't have the authority to fire [Powell], and should he be asked to go he's not going anywhere", she said.

He replied: "What I have said is the law gives me a four-year term and I fully intend to serve it".

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Powell's remarks came ahead of two days of testimony in Congress on the economic and policy outlook.

That leaves the central bank chief to his all-important two-day testimony to Congress beginning tomorrow to shed some light on how dovish he and his FOMC team might be at their July 30-31 monthly meeting. Many forecasters predict that growth has slowed to an annual rate of around 2 percent in the just completed April-June quarter. The main concern being the ongoing trade tensions between the USA and China, however Powell said that some concerns would be alleviated if the USMCA trade agreement is passed, which happens to be an effort that will be address by congress soon.

"Apparent progress on trade turned to greater uncertainty, and our contacts in business and agriculture reported heightened concerns over trade developments", Powell said, noting that business investment, an important component of economic growth, "seems to have slowed notably" in recent months.

Wednesday's testimony came as Powell and the Fed face harsh recent criticism from President Donald Trump, who last weekend called the agency "our most hard problem" and said its inaction has stifled economic growth. Unfortunately, a rate cut at this stage of the business cycle does nothing but undermine confidence for me because we have seen a recession immediately follow every rate cut that occurred when the unemployment rate was below 4%, as it is today.

Due to some stronger than expected US Non-Farm Payroll data at the end of last week, investors had been paring back bets of an aggressively dovish monetary policy tone from the Federal Reserve.

Powell said the central bank stands ready to "act as appropriate" to support record United States economic growth.

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