Key Movers

The US dollar opened lower this morning as markets reacted to the FOMC policy meeting and comments from Fed Chair Jerome Powell. As anticipated, committee members opted to leave rates on hold and proffered few changes in the official statement to that issued last month. While policymakers acknowledged the lack of progress toward the 2% target, the introduction of new language was largely in line with recent Fed commentary and had little market impact. Cue, Fed Chair Jerome Powell’s press conference. Markets were expecting a hawkish bias given the persistence of price pressures and wage inflation yet Fed Chair, Powell offered a dovish statement suggesting the Fed was looking for reasons to cut rates and it was “unlikely the next policy move will be a hike”. US treasury yields and rates fell, dragging the USD lower. The Euro has punched back above 1.07, while sterling trades above 1.25 and the Yen is markedly stronger following further suspected intervention from the Ministry of Finance and Bank of Japan. Following Powell’s press conference, the USD fell from 157.60 to 153 before settling around 155. Interestingly and unlike Monday’s suspected intervention following the move to 160 this recent adjustment came during a period of relative stability suggesting “excessive market movements” may not be the sole catalyst for intervention. Instead, it looks like currency officials may adopt a more opportunistic approach to intervention, keeping markets on edge.

Our attentions now turn to the Bank of Japan’s March meeting minutes and Eurozone PMIs for April as the headline items on the docket through Thursday.