Powell's power play: Dollar dives on one comment, but has many reasons to rise

If the Federal Reserve's statement was not hawkish enough – Chair Jerome Powell confirmed the upbeat stance.

However, one comment on rate hikes seemed to have reversed the course of the dollar's gains, sending it down. Fed Chair Jerome Powell has said that only a significant rise in inflation would trigger a rate hike. 

On the other hand, here are additional comments that may send the dollar back up:

He kicked off the press conference by saying that monetary policy is a good place – hinting that the current policy is the right one. While the bank is committed to supporting the economy, he refrained from hinting further accommodation is needed. 

Powell described the fresh move as an "insurance cut" – similar to the initial cut the Fed announced in July. That continues the stance that the economy does not require additional cuts. Markets may doubt it as this is the third move in three meetings. Nevertheless, insisting on this wording shows the Fed is reluctant to move in December. 

What would it take for the Washington-based institution to change its policy? Powell stressed that only a "material reassessment" to the outlook will change the Fed's path of interest rates. His words came in response to a question about the reaction function. His answer shows that the bar is high.

The Fed Chair also covered the strengths and weaknesses of the economy. While he said that manufacturing and investment are falling, he seemed bullish about consumption. He said that consumer-facing companies are reporting that shoppers are doing well. The sector has been unaffected by the slowdown elsewhere. 

Zooming out to the global economy, he said that uncertainty is lower following Phase One of the trade deal and the significant drop in the chances of a no-deal Brexit. 

Dollar reaction

While the dollar has begun retreating from the highs during Powell's presser – it may resume its rises afterward. The full reaction to Fed decisions often takes several sessions. Traders in Tokyo tend to trigger significant moves, and things move again when European investors join in.