Fed chair Powell - will act as appropriate
If anyone was expecting any surprises from the Fed chair this afternoon, they would have been disappointed. Jerome Powell has earned himself the reputation as a 'safe' central banker who does not like to upset the apple cart, and he has achieved that today.
In essence, his speech today has underlined the Fed's intention of acting as appropriate to the current conditions, and within that, it leaves the door open to a rate cut in September, which at present is heavily skewed towards a 25bp cut. He did not repeat the last Fed move as a 'mid-cycle adjustment', so some may be wondering whether the narrative has changed, but as yet, it is way too early to suggest the Fed are at the beginning of an easing cycle - which would start to see the USD ease off a little more.
However, he did acknowledge that the economy is facing significant risks and that the last 3 weeks have been 'eventful'. Consequently, the Fed is watching developments carefully and as stated above, will leave the door open to the size of any further accommodation. Indeed, the Fed's Bullard earlier today suggested that there will be a big debate on whether to go 50bps next time around.
On the plus side, Powell also reiterated the strong jobs market, and it is hard to argue against this. However, low inflation is a problem and this is also weighing on a favourable outlook for the US.
We saw some modest back and forth in the USD after the release of the speech, but it seems this was purely intra day position squaring with the major pairs not too far off levels seen earlier in the day. Looking at USD/JPY, one could be forgiven that it is not moving at all, with a tight range of 106.35-65 containing the market here for now.
EUR/USD is still finding sellers on the upside, but it is worth noting that the test lower earlier on met with some very strong demand at 1.1050.