Fed induced volatility of USD exchange rates to continue even after the summer – Commerzbank
|Fed Chair Powell struggled to sound convincing about a hawkish Fed over the coming months. Economists at Commerzbank expect volatility around USD exchange rates to persist.
Fed Chair Powell did not convince
“Because Powell had sounded uber-hawkish in the past, he was only able to surprise on the dovish side or come across as neutral at best. But not always, not yesterday. It made little difference that the Fed Chair repeated over and over again that there would be further rate hikes and that there would probably be no rate cuts this year.”
“Slowly a double discrepancy is emerging between the market view and the Fed: disagreement about the final peak in interest rates and disagreement on whether there will be rate cuts this year. The first of these two discrepancies will be decided in the spring, but I believe the FX market is more interested in the second aspect. That means that the Fed induced volatility of USD exchange rates is going to continue even after the summer.”
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