The US dollar has continued its downtrend today after the Federal Reserve Chairman (Powell) signalled there will be lower US interest rates for far longer.

Speaking at Jackson Hole, Powell declared a new policy framework for the central bank that will prioritise reaching full employment over controlling inflation levels. He said they would allow prices to exceed their 2% target for a year to help compensate for previous periods of undershooting this target. This means they’re likely to keep interest rates lower for longer which should encourage consumer spending and borrowing to help the US economic recovery. Currency traders took this as negative for the USD, however, as they’re attracted to currencies with rising interest rates as this provides higher yields.

As a result, the GBP/USD has hit an 8.5 month high after pushing up over 1% in today’s trading day. The EUR/USD rate is up a cent and now trading back to that 1.19 area. The GBP/EUR has also made some modest gains and currently trades around a 10-week high.