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Greenback Falters As Equities Surge Post-Powell

USD
  • The USD is selling off following comments from Fed Chair Powell, with US yields falling and major equities surging to fresh highs in the aftermath. Mention of “probably” in the main Bloomberg headline of *POWELL: PROBABLY NEED TO DO FURTHER INTEREST-RATE INCREASES is possibly underpinning the dovish reaction but worth noting this is not wildly different to language from the presser.
  • This from last Wednesday’s Q&A: "You know, we've raised rates four and a half percentage points and we're talking about a couple of more rate hikes to get to that level we think is appropriately restrictive. And why do we think that's probably necessary?"
  • Additional multiple mentions to the ‘disinflation process’ providing an additional tailwind as Powell leans into this narrative.
  • EURUSD is now close to 100 pips off the earlier lows and USDJPY has extended losses to 1.6% on the day, further widening the gap with firm resistance met yesterday at the 50-day EMA.
  • In emerging markets, USDMXN has flushed back below the 19.00 handle with the Mexican peso enjoying a relief rally after coming under significant pressure following last Friday’s US data. As mentioned, the trend outlook remains bearish and key support and the bear trigger is at 18.5080.
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