Market Reaction Unlikely To Match Powell's March Appearance (2/4)

Market reaction to Powell semi-annual testimony text release has, more often than not, been muted - especially when coming just after an FOMC decision where we've heard extensively from the Chair already.

• March's testimony was an outlier with the implied Fed terminal rate rising to a new cycle high (5.63% at the time, up 20bp) with hike pricing for the upcoming March meeting up 10bp (to 40bp), equities dropping and the dollar rising as Powell's text was unexpectedly hawkish: "If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes."
• In this regard, Jun 22 2022's release may be the most analogous as it was one week after an FOMC meeting, and the testimony basically repeated what Powell said at the press conference. DXY was 0.1% lower one hour after testimony text release; 0.1% lower 24 hours after testimony text release. Bonds a little stronger.
• In this week's case, a hike at the July meeting is not fully priced (70-75% of 25bp), so the degree to which Powell plays up its "live" nature will be a key focus. Of course, if asked, he's likely to emphasize data-dependence and stress that no decision has yet been made.

Other recent reactions:

• Mar 2 2022: DXY was flat one hour after testimony text release; 0.1% lower 24 hours after testimony text release. Bonds weaker over both periods.
• Jul 14 2021: DXY was 0.1% lower one hour after testimony text release; flat lower 24 hours after testimony text release. Bonds a little stronger over both periods.
• Feb 23 2021: DXY was 0.3% lower one hour after testimony text release; 0.1% lower 24 hours after testimony text release. Bonds initially flat; a little weaker 24 hours later.