USD: Powell pushes back against 50bp cut – ING

FXStreet Insights Team FXStreet

Fed Chair Jerome Powell explicitly pushed back against a 50bp rate cut by year-end, and Israel started a ground offensive in Lebanon. In other conditions, the US Dollar (USD) would have rallied on such a combination of events, but sensitivity to Fedspeak and Middle East turmoil has been reduced, ING’s FX strategist Francesco Pesole notes.

Geopolitics-FX link is also rather weak at the moment

“On the Fed side, the 50bp reduction in September means that market pricing is more structurally dovish-leaning, perhaps also on the premises that the Fed wouldn’t want to underdeliver on easing should a 50bp move be priced in by the FOMC date. On Monday, Powell said the base case is two 25bp moves by year-end, which is unusually specific guidance that signals his discontent with market dovish pricing.”

“The geopolitics-FX link is also rather weak at the moment. Israel’s ground raids in Lebanese territory were a highly-anticipated risk by US authorities, and the escalation was somewhat expected. The lack of substantial repercussions on commodities, with oil prices staying weak, means that FX markets are also not responding to the latest developments. There are upside risks for the dollar here too.”

“On the US data side, we’ll see the August JOLTS job openings print today, which is expected at an unchanged 7673k after a surprise drop last month. Markets may be more sensitive to those job opening numbers than the ISM Manufacturing index, which is also expected to have stabilised around 47.5.”

(This story was corrected on October 1 at 08:57 GMT to say, in the title, that Powell pushes back against 50bp cut, not hike.)

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.

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10

Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.

Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.