A nod by Powell to downside growth risks could accelerate USD profit taking even if the Fed hikes – SocGen

FXStreet Insights Team FXStreet

Nod by Fed Chair Powell to tighter financial conditions and downside growth risks could accelerate Dollar profit taking, economists at Société Générale report.

Dovish Fed hike could trip up the Dollar

“A smaller 25 bps rate increase by the Fed and minor revision to the dot plot poses downside risk for the Dollar this week.”

“A 50 bps increase would be a surprise but could backfire for the Dollar if the dot-plot shows no significant compared to December.”

“Even if the Fed raises rates, a nod by Fed Chair Powell to the downside growth risks could accelerate Dollar profit taking.”

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD turns south toward 0.6900 as USD firms up

AUD/USD sees fresh selling and drops toward 0.6900 in late Asian trading on Monday, as renewed US Dollar strength weighs on the pair amid lingering Middle East and Russia-Ukraine geopolitical tensions. Focus remains on Oil prices, Treasury bond yields, and RBA expectations for fresh trading impetus in the major.

USD/JPY retakes 158.00 amid hawkish BoJ bets, firmer USD

USD/JPY erases losses and retakes 158.00 in the Asian session on Monday, trading within a one-week-old range. Geopolitical uncertainty continues to underpin the US Dollar, despite fading Fed rate hike hopes, supporting the pair's rebound. However, further upside could be capped by hawkish BoJ expectations and looming intervention risks that could support the Japanese Yen.

Gold trades flat as stronger US Dollar offsets easing Fed rate-hike bets

Gold trades little changed on Monday after giving back most of its early gains. The metal remains caught between easing Fed interest-rate hike bets and a stronger US Dollar (USD), while US Treasury yields also remain elevated near multi-year highs.

Crypto Today: Bitcoin rally slows while Ethereum and XRP extend recovery amid slowing ETF inflows

Bitcoin is narrowly consolidating while trading above $86,000 at the time of writing on Monday. Altcoins, on the other hand, show a positive outlook, with Ethereum edging higher above $2,700 while Ripple steadies above $1.52.

Eurozone inflation just hit 3.8%, its highest in three years. This chart shows why the ECB can’t simply hike its way out

The ECB would normally have a relatively straightforward answer to inflation running almost twice its target: raise interest rates. But these are not normal circumstances. This time, the bond market is already doing part of the tightening for it, leaving the ECB facing an increasingly difficult dilemma.