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  • richard evans

USD holds post-Powell gains, but for how long?

Good morning


USD has held onto post-Powell gains with GBPUSD 1.1850, EURUSD 1.0555, leaving GBPEUR 1.1225. Powell spoke again yesterday and initially it sounded as though he may have been back-tracking a bit on his hawkish comments, saying that Fed were not on a set rate path and that no decision on rates has yet been made, but any USD weakness on those comments didn’t last long.


US jobs data in the form of ADP was stronger than expected, we do have nonfarms tomorrow which as we know can potentially have more market impact. We did have the Fed Beige book yesterday evening which didn’t offer anything particularly new but seemed to suggest inflationary pressures were easing in many districts, with some therefore questioning the reason for Powells recent hawkishness. There is still potential for volatility over the size of the next rate rise, not everyone believes we’ll see a 50bps rise in March.


BoC kept rates on hold yesterday as expected. They say they continue to monitor data but aim really to keep rates on hold. As you know I was looking for a possible move lower in USDCAD but instead was disappointed there was not more in the way of hawkish comments, USDCAD drifted above 1.3800 and is holding around that area as I type.


USD is also up against JPY at 136.75, although this is some way off the high early yesterday morning at 137.85. Eyes on the BoJ rate announcement in the early hours of tomorrow morning which will be Kuroda’s last meeting before being replaced by Ueda. Can’t see Kuroda doing anything although there seems to be a worry that a lack of any action could see USDJPY higher, therefore a tweak to their yield curve control banding could be introduced to stem further yen weakness. Even so, unless Ueda makes some policy changes reasonably quickly, there is still room for yen to weaken further.


Russia has launched a huge missile and drone attack on Ukraine, targeting residential areas as well as infrastructure facilities. The Zaporizhzhia nuclear plant had been hit leaving it without an electricity supply other than through generators. Russia seem intent on destroying as much of Ukraine as possible, the chances of an end to the invasion look extremely limited.


I went to watch Spurs play AC Milan yesterday evening, always impressed with the stadium although it would be nice if the football played there matched the building. As one of the pundits said, there is no point having the nicest house if you don’t have the furniture to go with it. Anyway, my ‘seat’ was actually in a standing area, yes there was a chair but the whole bottom area of the South stand is designed for safe standing. First time I have stood at a football stadium for years. I do like my creature comforts but have to say it was an enjoyable way to watch a rather mediocre match.


- 13.30 US initial jobless claims

- 18.30 BoCs Rogers speaks

- 21.30 NZ business PMI

- 23.30 Japan household spending

- 03.00 BoJ rate announcement

- 07.00 UK GDP, industrial production

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