Daily thread to exchange ideas and to share your thoughts
Good day, everyone! Hope you're all doing well as we get things going here on the session. It's all about the dollar in the aftermath of Fed chair Powell's testimony yesterday as his more dovish tones all but secured a rate cut later this month but also kept the door open for more aggressive easing by the central bank down the road.
That is putting the dollar under pressure since overnight trading and it puts us back to before the jobs report on Friday - more or less. Powell will testify again later today but it will be before the Senate Banking committee this time around. I reckon his remarks will more or less be the same but we'll see what questions he'll be asked today.
Once that is out of the way, the focus will turn towards trade headlines and US economic data in gauging how dovish the Fed message will be in the July meeting. I reckon that will make for some really choppy trading in the greenback between now and then so that will keep markets somewhat interesting at least.
I want to find an argument for the dollar to weaken considerably from here but unless yields threaten to fall off dramatically, it's tough to imagine that happening. As such, market participants will still have reason to keep faith in the dollar in my view.
Looking ahead, Powell all but reaffirmed a 25 bps rate cut and I would say that the Fed will eventually leave things open-ended in the sense that the cut in July could still be an "insurance" or lead to more rate cuts - depending on data and trade developments.
After all, the Fed always punts whenever they can and I reckon they will do so again in a few weeks' time. What are your views on the market right now? Share your thoughts/ideas with the ForexLive community here.
