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Powell Rules Out 75BP Hike Consideration, Greenback Falters

FOREX
  • After some initial two-way price action for the greenback following the FOMC decision and early comments from Chair Powell, the US Dollar came under significant pressure with Dollar Indices retreating close to 1.0%.
  • The comment that 50bp hikes "should be on the table at the next couple of meetings" and then dismissing any consideration of a 75bp increase particularly weighed on USD with price action extending throughout the press conference.
  • The likes of EURUSD and USDJPY moved in line with this greenback weakness with the former rising back above the 1.06 handle to reach 1.0626 and the latter crashing back below 129.00.
  • However, the key outperformers on Wednesday following the decision were Antipodean currencies and in particular the Australian dollar. AUDUSD has rallied close to 2%, benefitting from rallying equities as well as yesterday’s hawkish domestic monetary policy developments.
  • Despite the sharp pullback, bearish conditions still dominate the technical outlook which puts particular significance of the nearest resistance points of at 0.7261, Apr 5 high and then firmer resistance at 0.7301, the 50-day EMA.
  • USD weakness remained fairly broad based with CHF and CNH relative underperformers, only rising between 0.35-0.4%.
  • With a fairly light global economic data calendar on Thursday, focus will be on the Bank of England meeting/decision where markets are expecting a 25bp rate increase by the MPC to 1.00%. The MNI Preview can be found here: https://marketnews.com/markets/central-bank-reports/central-bank-preview/bank-of-england-preview/mni-boe-preview-may-2022-25bp-now-what-next

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