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Forex Today: Powell's More Dovish Tone Strengthens Dollar

Forex Today: Powell's More Dovish Tone Strengthens Dollar

Comments from Fed Chairman Powell yesterday lowered expectations regarding the pace of rate cuts in the United States.

➑️ Markets were shaken by Fed Chairman Powell's comments yesterday, which were not particularly strong, but in the highly dovish sentiment environment, they had an impact. CME's FedWatch tool now shows that nearly 62% expect a rate cut at the next Fed policy meeting of just 0.25%. This shift in sentiment sent the US dollar higher, particularly against a weak Japanese yen, while US Treasury yields also rose. Despite this environment, major US stock indices traded higher, with the S&P 500 index very close to a new all-time high, which is a divergently bullish signal for US stocks.

➑️ Preliminary data on the German consumer price index (CPI) released yesterday were slightly below expectations: analysts had forecast a monthly increase of 0.1%, but the CPI remained unchanged.

➑️ In the Forex market, the Australian dollar was the strongest major currency since the Tokyo open today, while the Japanese yen was the weakest. This highlights the AUD/JPY currency pair and indicates a continuation of risk sentiment.

➑️ Israeli troops have entered Lebanese territory, with Israel declaring it was conducting a limited operation to remove Hezbollah from its border area. The United States is now formally supporting this operation, a change of tone from yesterday. Global risk sentiment is apparently unchanged.

➑️ Three potentially very important data for the Forex market will be released today:

  1. Eurozone CPI Flash Estimate
  2. US ISM Manufacturing PMI
  3. JOLTS Jobs in USA

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Credit by DailyForex.com

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