17/05/2024
Written by: Ian Morley
Summary:
In the US afternoon, there was a mixed bag of economic data, with ADP payrolls surpassing expectations, while both JOLTS job openings and ISM manufacturing fell short. Despite this, the impact on the USD was minor leading into the evening’s Fed meeting. Market sentiment was generally down, which also pulled the GBP lower.
Fed Chair Powell’s remarks during the meeting didn’t meet the high hawkish expectations, stating that current monetary policy is restrictive enough and that convincing evidence is needed for a rate hike. This lack of a hawkish surprise didn’t provide new momentum for USD buying, with attention shifting to Friday’s job figures.
Overnight, there was volatility in JPY pairs due to speculation about Japan’s FX market interventions. Similar to Monday, there was broad USD selling, though it was contained within key support levels.
Speeches:
Market Insight:
Both GBPUSD and EURUSD are nearing crucial resistance levels following the Fed meeting and speculation about further Japanese intervention talks. However, the Fed’s comments didn’t seem sufficient to drive additional USD selling. Ahead of tomorrow’s job figures, we anticipate consolidation in USD pairs. Powell’s emphasis on the need for ‘persuasive evidence’ for a rate hike directs attention to future data releases, particularly Friday’s job numbers and CPI figures on May 15th, which could influence market expectations of a Fed rate hike this year.
On the geopolitical front, there are reports indicating potential progress in US-Saudi Arabia relations, potentially tied to diplomatic developments with Israel, contingent upon a resolution to the conflict in Gaza.
Analysis:
Following the perception of Fed Chair Powell’s dovish stance and resistance to considering a rate hike presently, market expectations for a rate cut by the Fed have shifted from potentially occurring in December to now looking more likely in November. Focus is now on Friday’s job numbers and subsequent CPI figures on May 15th.