Powell May Be Planning a Post-Election Fed Pivot

The U.S. Dollar Index (DXY) took a dive last Friday following a middling jobs report. Could the move be the start of a bigger breakdown?

The DXY, a measure of the dollar’s relative strength versus a basket of foreign currencies, peaked in late September. Since then it has fallen into a sideways trading range, failing to make new highs despite another jumbo rate hike by the Federal Reserve last week.

Currency traders may be looking ahead – specifically to the likelihood of a U.S. economic downturn in 2023. The potential of another housing-led Great Financial Crisis also looms.

The full effects of the Fed’s latest rate hike won’t be known for months, but higher borrowing costs will hit struggling consumers, prospective home buyers, and small businesses.

The pain of higher debt servicing costs will also be felt by politicians in Washington, D.C. Many are now begging Powell to back off on further rate hikes.

Democrat Senator John Hickenlooper wrote a letter to Fed Chairman Powell recently to “urge the Federal Reserve to pause and seriously consider the negative consequences of again raising interest rates.”

“There are causes of inflation beyond the amount of money in circulation,” Hickenlooper continued. Of course, all other “causes of inflation” are exacerbated by loose monetary policy!