Text from Powell testimony released - rate cut underlined
Ahead of this afternoon's testimony in front of the Senate Banking Committee, the text from Fed chair Powell has been released and shows that the FOMC has seen a rise in uncertainty which could dim the outlook on the US economy. This would suggest that the least we can expect the Fed to do at the end of the month is a 25bp cut, so it remains to be seen just how far this will press on the USD over the coming session.
The text also mentions that soft inflation could be a little more persistent than the Fed have anticipated, so this also points to a likelihood of a cut as this has been a major bone of contention for policymakers through their rhetoric recently.
The USD impact has been pretty immediate, with USD/JPY dropping back towards the mid 108.00's. We expect to see some support coming in here ahead of 108.50. This ties in with US Treasury yields coming softer with the 10yr Note now back to 2.05%.
EUR/USD is now pushing higher, taking out resistance in the 1.1225-30 area and we are now looking for a potential move on 1.1250-60 resistance. 1.1280-90 is the next key area to watch for.
With UK data not as bad as feared, Cable is also higher, pushing above 1.2500 and looking to test the next area of congestion around 1.2525-30.
Strong gains also seen in NZD/USD, which was smashed down to 0.6565 in Asia, and is now looking to push above 0.6650. AUD/USD is back in the mid 0.6900's after testing support ahead of 0.6900, but all eyes now on USD/CAD as we have the BoC meeting due at 15.00 London time.