- Federal Reserve's Jerome Powell disappoints the markets and sends bonds lower.
- US yields have shot above 1.5% again which has taken the greenback along for the journey.
The greenback continues to reign as king of the forex space in a strong move higher during the Federal Reserve's chair event, whereby Jerome Powell declined to pushback on the recent moves in the bond markets.
As a result, USD/CHF is now approaching the 0.93 area after rallying near to 1% on the day so far, travelling from a low of 0.9189 to reach a post-Powell 0.9291 high.
“We monitor a broad range of financial conditions and we think that we are a long way from our goals,” Fed's Powell said in an interview with the Wall Street Journal's chief economic correspondent during a live webinar.
When addressed on the recent volatility in the bond market and the market's presumption that higher levels of inflation will force the hand of the Fed, much to the dislike of markets, Powell simply stated the following:
“I would be concerned by disorderly conditions in markets or persistent tightening in financial conditions that threaten the achievement of our goals.”
The main message as we head into the blackout period before the March 16-17 FOMC meeting is that the Fed will not be raising rates until the mandated conditions are fulfilled.
Powell also stated that financial conditions remain highly accommodative, indicating the Fed is not concerned about the current level of yields but is watching volatility.
As a result, the bond market got spooked again and the Fed got more volatility to watch closely.
US Treasury yields are spiking with the 10-year yield well above 1.50%, advancing to a high of 1.5470%.
US stocks have also fallen with prevailing risks to the economic recovery pertaining to the threat of higher rates and inflation.
The dollar reigns over its peers, but Swiss can hold up
DXY took out last week’s high near 91.394 and is on track to test the February 5 high near 91.602. A break above that would open risk towards the November 23 high near 92.80.
CHF makes up only 3.6% of the DXY basket.
In an environment whereby higher betas, such as AUD, are more vulnerable to risk-off supply and rising US yields, the Swiss franc has historically fared better to its peers, outside of the greenback, within the G10 scope. Ironically, that has not been the case today as the swiss currency trades the worst to the US dollar by comparison.
However, as investors rotate away from, say, the commodity complex, the safe-haven appeal of Switzerland could reign in the price of USD/CHF which is already overdue a weekly correction as it moves deeper into supply territory.
-637505015439793680.png)
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD fluctuates in daily range above 1.0600
EUR/USD struggles to gather directional momentum and continues to fluctuate above 1.0600 on Tuesday. The modest improvement seen in risk mood limits the US Dollar's gains as investors await Fed Chairman Jerome Powell's speech.
GBP/USD stabilizes near 1.2450 ahead of Powell speech
GBP/USD holds steady at around 1.2450 after recovering from the multi-month low it touched near 1.2400 in the European morning. The USD struggles to gather strength after disappointing housing data. Market focus shifts to Fed Chairman Powell's appearance.
Gold retreats to $2,370 as US yields push higher
Gold stages a correction on Tuesday and fluctuates in negative territory near $2,370 following Monday's upsurge. The benchmark 10-year US Treasury bond yield continues to push higher above 4.6% and makes it difficult for XAU/USD to gain traction.
XRP struggles below $0.50 resistance as SEC vs. Ripple lawsuit likely to enter final pretrial conference
XRP is struggling with resistance at $0.50 as Ripple and the US Securities and Exchange Commission (SEC) are gearing up for the final pretrial conference on Tuesday at a New York court.
US outperformance continues
The economic divergence between the US and the rest of the world has become increasingly pronounced. The latest US inflation prints highlight that underlying inflation pressures seemingly remain stickier than in most other parts of the world.