Dollar rallies across the board on Fed’s Powell hawkish comments November 3, 2022

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Despite an initial tumble after the release of a 75 basis point rate hike by the Federal Reserve as widely expected, the greenback quickly erased its intraday losses and rallied in tandem with US yields as comments J. Powell’s hawkish claims that it was premature to discuss a pause in interest rate hikes sparked widespread risk aversion.

Reuters reported on Wednesday that the Federal Reserve had raised interest rates by three-quarters of a percentage point as it continued to battle the worst inflation spike in 40 years, but flagged that future increases in the cost of Borrowing could be done in smaller steps to accommodate the “cumulative tightening of monetary policy” it has adopted so far.

The new wording of the policy statement took note of the still-evolving impact that the rapid pace of Fed rate hikes has set in motion, and a desire to focus on a level for the federal funds “tightly enough to bring inflation down to 2% over time.”

“Continued increases in the target range will be appropriate,” the U.S. central bank said at the end of its latest two-day policy meeting. Without ruling out any future decisions, the officials said: “In determining the pace of future increases in the target range, the (Federal Open Market) Committee will take into account the cumulative tightening of monetary policy, the lags with which the monetary policy affects economic activity and inflation, and economic and financial developments.

Against the Japanese yen, the dollar regained selling at 148.37 in Australia and fell to 147.17 in the Asian morning. Despite rallying to 147.70 ahead of the European open, the price briefly dipped to 145.68 in New York, only to rebound strongly in tandem with US yields at 147.96 on Fed’s Powell hawkish comments .

Reuters reported that the US private sector payroll rose more than expected in October, offering further evidence of labor market resilience and suggesting the Federal Reserve may continue to aggressively raise interest rates for some time to come. .

Private employment rose by 239,000 jobs last month, the ADP’s National Employment Report showed on Wednesday. September data has been revised down to show 192,000 jobs created instead of 208,000 as previously reported. Economists polled by Reuters had forecast an increase of 195,000 private jobs.

The ADP report, developed in conjunction with the Stanford Digital Economy Lab, was released Friday ahead of the Department of Labor’s Bureau of Labor Statistics’ more comprehensive and closely watched jobs report for October.

The single currency traded with a firm Asian bias and gained as high as 0.9899 in the Asian morning before rising to 0.9914 in the New York morning. Although it briefly rallied to session highs of 0.9976 after the FOMC, the pair later erased its losses and fell to 0.9814 on broad USD strength on hawkish comments. from Powell of the Fed.

The pound was trading sideways in Asia before falling back to 1.1450 in the New York morning. Despite jumping to session highs of 1.1565, Cable then fell in tandem with the Euro to an intraday low of 1.1388 near the end of the USD rally.

The data will be released on Thursday:

Australia S n P Global Services PMI, Balance of Trade, Imports, Exports, Japan Holidays, China Caixin Services PMI, Swiss CPI, Italy Unemployment Rate, UK S n P Global Services PMI, Unemployment Rate of EU, BOE Interest Rate Decision, BOE MPC Vote Up, BOE MPC Vote Unchanged, BOE MPC Vote Cut, US International Trade Balance, Goods Trade Balance, Initial Unemployment Claims, continuing unemployment claims, labor costs, productivity, global SnP services PMI, non-defense durable goods, non-defense durable goods, non-transportation durable goods, factory orders, ISM non-manufacturing PMI, building permits in Canada, trade balance, exports and imports.

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