US Open Note – Powell’s hawkish transition unable to boost the dollar



Powell signals faster tapering

Global markets were struck by Fed Chair Jerome Powell’s hawkish tone during his testimony before the Senate Banking Committee on Tuesday. Powell stated that inflation could no longer be characterized as transitory, indicating that his central bank will consider speeding up its tapering process during the upcoming FOMC meeting in December. Terminating the Quantitative Easing programme faster than planned could be interpreted as an early rate hike signal since the Fed has made clear that it would like to end its bond buying programme before raising rates.

The 10-year US Treasury yield soared after Powell’s remarks but soon surrendered those gains, with the greenback also being unable to hold on to its early testimony-related gains. On Wednesday, the US dollar remained relatively unchanged against a basket of currencies at 96.02.

In the rest of the FX arena, the euro has suffered losses against the dollar and sterling at the time of writing, as pandemic-related risks are casting a darker shadow over the continent. The common currency ticked 0.18% lower against the greenback to $1.1322, while versus sterling, the euro fell by 0.33%. Commodity-linked currencies enjoyed  a strong rebound on Wednesday, with the aussie rising by 0.32% against the dollar to 0.7151, while the greenback fell by 0.25% against the loonie.

US stocks are back in the green

On Tuesday, major US indices finished firmly lower as panic-selling gripped global markets amid perceived hawkish comments from the Fed’s Chair and elevated pandemic anxiety due to the Omicron variant. Therefore, market participants could witness further volatility over the coming month as investors will be closing their books for the year, amplifying market moves.

US stocks are headed for opening gains on Wednesday, as the latest Covid-19 variant doesn't look enough right now to derail the ongoing recovery process. The S&P 500 and Dow Jones futures rose by 1.31% and 0.95%, respectively. Likewise, the tech-heavy Nasdaq 100 is set to gain 1.44% at the opening bell.

In the commodity market, WTI crude oil surged by 3.55% as traders may have exaggerated the possible impact of the latest variant on oil demand. Meanwhile, gold inched higher by 0.80%, mirroring the improvement in risk appetite.

Salesforce share price tumbles

Salesforce’s share price is down by over 6% in pre-market trade after the software company’s guidance came short of expectations despite reporting strong earnings. GAP was the S&P 500 index’s worst performer during yesterday’s trading session, as its share price tumbled by 7.13%. The clothing retailer came under pressure after settling with the US Department of Justice, following claims that it had breached a discrimination law.

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.