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Jun 15 - 05:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Holds Above 2017 Low As Fed's Powell Softens Dollar

By Randolph Donney  —  Jun 15 - 03:35 PM

The dollar index weakened in a choppy session on Wednesday after the Fed delivered a widely expected 75bps rate hike followed by comments from Chair Powell tempering expectations for more increases of such extraordinary size nW1N2WO00V.

In an up-and-down session, the dollar initially dipped alongside Treasury yields in early trading then rallied after the Fed delivered the jumbo hike markets hurriedly priced in this week nS0N2Y202S and finally succumbed after Powell's comments nW1N2WO00V.

Before the Fed, EUR/USD weakened after the ECB's emergency meeting to deal euro zone bond market fragmentation risk nL1N2Y20BH left the forex market wanting even though 10-year BTP-bund yield spreads fell roughly 25bps from Monday's 2.52% closing high.

EUR/USD made new June lows near crucial 2022 and 2017 lows at 1.3049/40 before Treasury yields slipped on Powell's presser.

ECB President Christine Lagarde said the ECB must focus on bringing inflation back to its 2% target and policy must not be dominated by fiscal considerations nS8N2W30CF.

The euro zone trade deficit doubled in April nL1N2Y20LT, highlighting the hit from soaring energy prices and EUR/USD weakness.

EUR/USD was up 0.4% after hitting a low at 1.0359 on the Fed policy announcement.
Much weaker-than-expected U.S. retail sales data nL1N2Y1219 may also have tempered the post-Fed rebound in Treasury yields, but EUR/USD remains uncomfortably close a major break to its lowest since 2003, with some still gunning for parity.

USD/JPY was down about 1.4% and it broke a string of 16 sessions with higher lows after making marginal new 24-year highs.

The gap between prices and the 54bps surge in 2-year Treasury-JGB yields over the last week is resolving with both retreating.

The BOJ is being forced to increase JGB buying to defend its 10-year yield cap ahead of Friday's meeting, but rate hikes remain off the table


Sterling gained 1.7% after the dollar was undermined by Powell's presser, as markets awaited a toss-up BoE decision on Thursday over a 25bps or 50bps rate hike nL1N2Y21B5.

Aussie rebounded 2.1% after Tuesday's risk-off lows held above May's key lows and the dollar weakened late in the day.

The yuan rebounded 1.2%, aided by USD/CNH hitting technical resistance to start the week nL1N2Y21DJ and less angst regarding a series of 75bp Fed rate hikes.

Bitcoin and ether recovered from their latest losses.

The BOE meeting is Thursday's main event.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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