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Powell Plays Down .5% Cut Chances
The Dollar is rallying today on the back of hawkish comments from Fed chairman Powell yesterday. Or rather, less-dovish-than-expected comments. Powell pushed back firmly against those projecting a further .5% rate cut before year end, signalling that the Fed’s base-case scenario is for two further .25% cuts. Market pricing has been fluctuating on the back of the September .5% cut and traders are still currently looking for around .7% worth of cuts ahead of year end. This view is likely premised on the idea that US jobs and inflation data will continue to trend lower, forcing the Fed’s hand.
Rate Pricing Shift
Powell’s pushback, and specifically comments on two further rate-cuts are an interesting development. With market pricing having grown more dovish over the last week, Powell’s comments have forced a shift with the CME group now pricing in just a 40% chance of a larger .5% cut in November.
US Jobs Data Next
Still, the real focus this week will be the latest US jobs report on Friday. If data comes in weak again, this will no doubt see pricing swing back in favour of a larger cut, sending USD sharply lower. However, if data meets forecasts, or surprises to the upside, expectations of a larger cut are likely to fade quickly, giving USD more room to recover near-term.
Technical Views
DXY
The index is attempting to break back above the 100.93 level here. If seen, focus will shift to a test of the 102.46 level and retest of the broken bull trend line next. This is a key pivot area for the market with the broader bear bias remaining while price stays below. Above, focus shifts to 104.05 next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.