- The US dollar dropped against most of its G10 peers yesterday as the market focused on comments from Fed Chairman Jerome Powell as he kicked off his two-day testimony to Congress. With recent data doing little to clarify the outlook for the US economy and timing of rate cuts, Powell’s prepared comments also gave very little way. The Chairman stated that, “there’s no evidence, there’s no reason to think, that the US economy is in, or in some kind of short-term risk of, falling into recession.” Speaking about inflation, he said that the central bank was on a “good path” to achieve its hoped-for soft landing, where inflation continues to fall to its 2% target while the economy grows, and the unemployment rate remains low. “We expect inflation to come down, the economy to keep growing” adding “if that’s the case, it will be appropriate for interest rates to come down significantly over the coming years.” A June cut from the Fed is currently priced in and we will hope for further insight when Powell continues later today ahead of tomorrow’s Non-farm Payroll release.
- The single currency gained against the greenback yesterday, with EURUSD briefly trading above the psychological 1.09 level but failing to breach recent resistance. Today’s ECB meeting is expected to pass with little fanfare and rates unchanged. Markets however will be hoping for some insight on the possible timing of the first cut when President Christine Lagarde delivers her post meeting press conference.
- The pound followed EURUSD higher yesterday with cable currently sitting comfortably above 1.27. UK Chancellor Jeremy Hunt delivered his budget yesterday, telling MPs that the latest OBR forecasts show UK inflation falling below the 2% target in “just a few months’ time, nearly a whole year earlier than forecast.”
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