There is a little bit of this and a little bit of that in the Fed Chair comments and in the markets:
In the forex, the major indices saw the dollar spike higher and then retrace. The US yields moved higher and came back off. The US stocks fell and recovered.
EURUSD: The EURUSD moved below the 200 bar moving average on the 4 hour chart at 1.08334 and to a low of 1.0800. That took the price below the 100 day moving average 1.0805, but it was only briefly. The corrective high off the low reach 1.0841 which did take the price back above the falling 200 bar moving average but it stalled ahead of the swing area between 1.0842 and 1.0848.
USDJPY: The USDJPY spiked higher with the price moving to a high of 140.167. That was just short of the low of a swing area at 140.22 (see red number trickles on the chart below). The corrective low after spiking higher stalled right at the 200 hour moving average 139.624. The current price is trading between those levels of 139.90.
GBPUSD: The GBPUSD fell to the high from yesterday to trade at 1.2623, and found support buyers. The price has bounced back higher and currently trades at 1.2658. The high corrective price reached 1.2679 which looking back in time was the swing high going back to May 10.
AUDUSD: The AUDUSD fell sharply but found support buyers near the 100 hour MA (blue line in the chart below). The price bounced off that level and moved back to test the swing high from May at 0.6817 and the sellers leaned. The price is trading between those levels at 0.6793. The support and resistance levels are defined.
In the US stock market:
- Dow Industrial Average’s lower by 260 points or -0.76%
- S&P index is near unchanged at 4368.39
- NASDAQ index is up 31 points or 0.23% 13603.40
in the US debt market:
- 2 year yield 4.707%, +1.1 basis point
- 10 year yield 3.801% -3.7 basis points
- 30 year yield 3.880% -6.1 basis points
Below are the headlines from Powell in buckets. He was more hawkish on things like inflation, employment, policy but did say:
- We will look at all the data, the evolving outlook, and will make the decision in July.
On Inflation:
- We expect wages not to fall, but to grow more slowly.
- We will want to see gradual slowdown in wage growth as part of the process to bring down inflation.
- Restoring price stability is our top priority.
- We want to get inflation down to 2% with minimum damage to the economy.
- If you look at the core data you just aren’t seeing the sufficiently movement down in inflation.
- The risk to inflation is to the upside.
- We are stretching out to a more moderate pace of hiking to avoid exacerbating inflation.
- Reducing inflation is likely to require below trend growth, some softening of labor conditions.
On Employment:
- The dynamics of the labor market is central to our discussions.
- It is a very tight labor market.
- We see housing putting in a bottom, maybe moving up a bit.
- Labor market has surprised with its extraordinary resilience.
- Policymakers expect subdued growth to continue.
On Policy:
- No policymakers see rate cuts this year.
- It will be appropriate to cut rates when inflation comes down.
- To maintain real rates as inflation comes down, will need to lower nominal rates in the future.
- We are trying to get inflation right.
- Most policymakers thought it is reasonable to adjust pace slower.
- July rates decision will have 3 months’ worth of data.
- We didn’t make a decision about July.
On Banking:
- We do expect that there will be losses at some banks.
- Commercial real estate feels like something that will be around for some time.
- We’re watching commercial real estate carefully.
- Too early to know the full extent of banking turmoil related credit tightening.
- If we see more of an effect from credit tightening, we will factor that into rate decisions.
- The turmoil in the banking sector since March is concerning, and data came in on the high side of expectations.
Other Noteworthy Topics:
- We expect to see rent filtering into housing services inflation.
- In 2022 and now in 2023, many analysts believe getting wage growth down is important for getting inflation down.
- In 2021 inflation was coming from a strong demand for goods.
- We are not seeing a lot of progress on core PCE.
- We want to see inflation moving down decisively.
- I can’t tell you I ever have a lot of confidence where fed funds rate will be far in advance.
- We will look at all the data, the evolving outlook, and will make the decision in July.
- We are highly attentive to risks high inflation poses to both sides of mandate.
- Global inflationary pressures are more persistent than forecast.