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JPow Sends Dollar Nosediving

Fed Chair Jerome Powell spoke at the Brookings Institution yesterday, confirming that the Fed might slow the pace of interest rate hikes. Still, he added, it needs to do more to bring inflation back to its 2% target.

The dollar plummeted on the back of the pace slowdown remarks, letting equities, currencies and commodities across the pond soar.

Key factors for today:

• Dollar reverses course after JPow signals slower pace of hikes


• Yen best FX performer on a combination of affairs


• Oil and gold were supported higher by the weakening greenback

Tech 4.41% higher after JPow speech

Risk sentiment was initially on the back foot on lower ADP jobs than expected. Then markets surged after Powell gave the green light for a 50 bps hike at the next Fed meeting. These are his last remarks ahead of the blackout period that precedes the FOMC. He did reiterate that there was still some time to go for rate hikes, but the commentary was viewed as the start of the trend towards an eventual pivot.

Nasdaq jumped to 12k to record a 4.41% advance, forming a double top as markets wait for tomorrow’s Nonfarm payrolls. The S&P 500 and DJIA ripped 3.09% and 2.18% higher instead.

Yen amongst better FX performers

USD/JPY closed 1.28% below its daily high and remains under severe pressure in Thursday’s early session, down more than 1% already. A combination of a weaker dollar from Powell’s comments and a stronger yen after better-than-expected CapEx spending on top of speculation that the situation in China will improve might weigh on the pair further.

Euro and pound rose 0.80% and 0.96% due to the greenback’s demise and remained biased upward from the broader spillover from Asia. EUR/USD might revisit the $1.05 peak, with cable traders looking at the $1.22 top.

Commodities go for a 3-day streak

Following Powell’s comments, the short end of the yield curve fell, and the dollar weakened as futures priced at a terminal rate just short of 5.0%. Oil and gold gained along with other commodities, and if the session closes on the positive side on Thursday, both assets will be recording a 3-day streak of gains. WTI closed 2.2% higher and gold 1.10%, but oil has lost momentum as it failed to breach yesterday’s peak of $82/bbl, whereas gold traded 0.84% higher at $1782/oz already.

EIA’s reported draw may explain the extra shot of optimism in crude prices as it reported a draw of 12.6M compared to the 2M expected. US exports bounced to 11.8M from 9.9M, while over a million barrels were drawn from the SPR.

Movers/shakers

• Horizon Therapeutics +27% after confirming it was in discussions with JNJ and Amgen on a possible takeover


• Titan Machinery +26% after a major beat over expectations in earnings on top and bottom, and raised guidance on the strength of the agriculture sector


• Workday+17% after earnings beat despite challenging macro situation, with cRPO backlog above expectations, with solid guidance and new share buyback


• Petco +16% with top and bottom line earnings within expectations, but margins above what was anticipated. Also affirmed guidance


• CrowdStrike -15% despite beating earnings estimates, but ARR was below expectations, guided sales to drop

On the docket

• EA unemployment rate


• Personal income, Jobless claims and PCE price index


• Manufacturing PMIs


• Fed’s Logan, Bowman and Barr speak


• UK housing prices

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