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Greenback Rips Higher As Powell Plays Down March Cut Likelihood

FOREX
  • An initial hawkish reaction to the January FOMC statement was followed by the greenback resuming a downward trend on Wednesday as Powell began his January press conference. However, with the Fed Chair expecting the committee to not be in a position to cut in March, the US Dollar has spiked higher, prompting the DXY to quickly erase all prior declines and tilt into positive territory as the APAC crossover approaches.
  • Given the sensitivity to front end US rates, USDJPY has predictably been among the most volatile G10 pairs. The original dip to session lows of 146.01 has been overshadowed by the impressive near 1% bounce since. Spot deals around 147.35, still a way off the much earlier overnight highs of 147.90.
  • The USD index stands 0.3% higher on the session and with equities hard hit by the news, the likes of AUD (-0.67%) and NZD (-0.46%) are among the poorest performing currencies on Wednesday. The Euro and GBP losses are more reflective of the advance seen for the broad USD index as Powell’s late remarks have trumped the plethora of weak US data points that crossed in early US hours.
  • Focus quickly turns to Eurozone inflation data on Thursday, which will be followed by the Bank of England decision. In the US, ISM manufacturing PMI headlines the docket before Friday’s release of non-farm payrolls.
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