EURUSD higher after Powell's speech! 💶📈

The head of the Fed and chairman of the FOMC, Jerome Powell, in his speech on October 14, pointed to the tightening labor market and deteriorating business prospects, emphasizing that under these conditions, a shift in monetary policy to a more "neutral" stance was justified to avoid unnecessary tensions in the economy and financial system. Powell noted that currently "there is no risk-free policy" – rather, there is a range of possible scenarios whose probabilities change depending on incoming data and signals from the economy. He also added that despite noticeable pressure in the labor market, the risk of persistent inflation and the impact of tariffs and trade fees on prices remain a real challenge for monetary policy.
In Jerome Powell's speech, the following points were also heard:

• The future direction of monetary policy is shaped by data and risk assessments.
• Before the US government shutdown, data indicated that economic growth might be stronger than anticipated.
• Currently, there is no completely "risk-free" approach to monetary policy.
• Available data suggest that the current state of the economy is similar to that of September.
• There has been an increase in downside risks for the US labor market.
• Rising risks for the labor market justified the interest rate cut in September.
• Existing data indicate that tariffs contribute to increased price pressure.
• The latest data suggest an employment environment characterized by low levels of employment and layoffs.
• The US central bank has access to additional data sources beyond those provided by the government.
• The end of balance sheet contraction may be approaching "in the coming months."
• There are signs that some segments of money markets are experiencing tighter conditions.
• There is room for the Federal Reserve to be more "flexible" regarding the size of its balance sheet.
• The current set of Federal Reserve policy tools is working effectively.
• Removing the Federal Reserve's ability to pay interest would significantly complicate interest rate control.
• Losses incurred by the Federal Reserve do not affect monetary policy, and profits are ultimately expected to return.
• Federal Reserve officials will discuss the composition of the balance sheet.
• The Federal Reserve continues to aim for a balance sheet consisting solely of Treasury securities in the long term.
• Stopping balance sheet expansion earlier would have minimal impact.
• The balance sheet remains a key tool of monetary policy.

Powell's speech had a balanced tone, but markets perceived it as dovish. The focus on the labor market situation and increasing risks in the economic environment may suggest that the Fed is currently more concerned about the economy's condition than inflation itself. This emphasis is interpreted as a signal that monetary authorities may be inclined to faster interest rate cuts. Contracts on major US indices are rising after the Fed chief's speech, and the dollar is weakening.

EURUSD (H1) 

Source: xStation5