USD and Treasury Yields Resume Uptrend After Hawkish Remarks from FED’s Jerome Powell
Yesterday we heard some hawkish remarks from FED’s chairman Jerome Powell after FED officials have been attempting to push back on dovish market pricing all week. However, traders have been disregarding them after last week’s FOMC meeting, which has been keeping the USD soft, while other currencies have been benefiting. But yesterday, Powell held a speech where he mentioned the policy not being as tight which sent the USD higher.
Powell re-emphasized some of his more hawkish remarks from the FED press conference, and the market paid attention this time. US Treasury yields surged higher to 4.65% and the US currency followed up. The US dollar started rising after Powell stated that the FED has not hit the peak regarding rates. Following the FED and non-farm payrolls last week, the FED funds futures market was pricing in up to 100 bps cuts in 2024. That has now been reduced to 75 bps which is a full round trip from pre-FED levels.
It comes as Powell and the rest of the FOMC have fought back against dovish FED pricing. They’ve been working hard to preserve the option of hiking alive at one of the next two meetings. That hasn’t happened yet, with only a 23% chance at the January 31 meeting, but they might not be done yet.
GOLD was surging higher yesterday during the European and early US session, reaching the 20 SMA (gray) on the H4 chart but failing to push above it. Then Powell reversed the price down and we decided to open a sell Gold signal.
FED Chairman Jerome Powell’s Speech
- We are not confident that we’ve achieved sufficiently restrictive policy
- If it becomes appropriate to tighten policy further, ‘we will not hesitate’
- We will continue to move carefully, decide meeting by meeting
- Attentive to the risk that stronger growth could undermine inflation progress, which could warrant a monetary policy response
- We expect GDP growth to moderate in coming quarters, but remains to be seen
- The labor market is tight, but coming into better balance
Question and Answer Session
- The economy has been ‘remarkable’
- US economy may be structurally more resilient to higher rates but I don’t see evidence yet
XAU/USD Live Chart
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