Fed Head Powell’s Testimony Kept September Cut on the Table As Labor Market Cools

July 10, 2024 6:41 am

Fed Chairperson Jerome Powell took center stage in his testimony in front of the Senate Banking Committee, as he cited that waiting too long to cut interest rates could risk hurting the U.S. jobs market.

Although he declined to give any explicit forward guidance on easing, Powell acknowledged that labor conditions have cooled “considerably” and that cutting too little or too late “could unduly weaken economic activity and employment.”

The Fed head further explained that high inflation is not the only risk they are facing when it comes to adjusting monetary policy but also noted that they are still waiting on more data to give them enough confidence to lower borrowing costs.

Link to Fed Chairperson Powell’s Semi-Annual Monetary Policy Report

Markets are now pricing in a 70% chance of a Fed interest rate cut in September versus 63% from a week ago, according to the CME’s FedWatch tool.

Market Reaction

U.S. Dollar vs. Major Currencies: 5-min

Overlay of USD vs. Major Currencies Chart by TradingView

Overlay of USD vs. Major Currencies Chart by TradingView

The U.S. dollar had been treading carefully leading up to J-Pow’s big speech, moving mostly sideways against its counterparts during the earlier trading sessions.

Although the Fed Chairperson talked about the possibility of easing soon, the Greenback still advanced across the board during the event and continued to cruise higher a couple of hours later.

Soon enough, the U.S. currency returned its intraday gains against majority of its counterparts, with the exception of the Japanese yen and British pound.

Feed from Babypips.com

MoneyMaker FX EA Trading Robot