Forexlive Americas FX news wrap: Fed pushes back against rate hike fears | Forexlive

Markets:

Gold up $29 to $2314US 10-year yields down 5.4 bps to 4.63%WTI crude oil down $2.83 to $79.10Bitcoin down 4.4%S&P 500 down 0.1%NZD leads, USD lags

The market was anxious ahead of the FOMC decision, particularly in light of Monday’s hot wage data. That was compounded by some poor earnings numbers from chipmakers, Starbucks and CVS.

Still, the US dollar retraced some of the gains from earlier in the week before settling into a range ahead of the announcement. The statement was largely a non-event but didn’t contain any kind of hawkish shift and surprised somewhat with a QT taper of $35B instead of $30B expected.

The larger round of dollar selling came after Powell pushed back against repeated attempts to bait him into a hawkish shift. He made it clear that the Fed’s base-case is either to cut rates or wait longer for greater confidence in inflation falling. He said also said that a couple ticks higher in the unemployment rate wouldn’t be enough for cuts.

The dollar fell across the board as he spoke but towards the end of the press conference, that move reversed. Equities also gave back all the gains and more. The market may be increasingly convinced that inflation isn’t going to come down, or there could be fears about the economy or overheated AI tech trades.

Generally though, it takes a day or so to sort through the FOMC and it might be particularly tough this time because of the turn of the month and looming non-farm payrolls report.

Quotable from Powell:

“I think it’s unlikely
that the next policy rate move will be a hike. I do think it’s clear that
policy is restrictive. We believe, over time, it will be sufficiently
restrictive.”