Powell Convinces Markets the FED Is Not Done Yet
The USD was bearish during the Asian and European sessions yesterday, but made a bullish reversal as FED policymakers continued to underline the flexibility of rate hikes. In a speech, Jerome Powell stressed the hawkish themes from last week’s press conference while being silent on the dovish points, which boosted the US dollar since markets took this as a hawkish signal for one more hike.
The FED remains hawkish,The Treasury auction was the worst showing since 2011 which had a 5.7 bps tail. There was some discussion of technical troubles and ransomware as possible explanations, but bond yields remained bullish until the end, putting a floor in the 10-year notes just below 4.50% until at least next week’s inflation report.
The rise in rates and risk aversion in equities gave the USD a major boost in the US session, knocking EUR/USD 60 pips off the highs as USD/JPY rose to 151.30. It was a consistent trend that contributed to the unwinding of some commodity currency gains in early North American trade. Despite the paucity of US economic data, the trading day was surprisingly active. The winning run in US stock markets which started at the and of October came to an end at eight, setting up an intriguing Friday session with UMich sentiment on the table.
