FED: Powell Remains Concerned By "Larger Than Anticipated" Tariff Impact
Apr-16 17:38
Fed Chair Powell's speech text on the "Economic Outlook" is here (link).
- It doesn't sound like there is much new here, though note he is repeating his assessment from April 4 that the tariffs and their likely effects are "significantly larger than anticipated" - so that in itself may be construed as a slightly hawkish signal as he doesn't seem swayed by the subsequent April 9th 90-day tariff "pause", or market dislocations in the interim. He certainly isn't changing his mind on being patient before moving on rates:
- "For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance. We continue to analyze the incoming data, the evolving outlook, and the balance of risks."
- He notes clearly that the Fed may be forced to make tradeoffs between its dual mandate goals - a topic he's commented on previously in a similar vein: "Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem. As we act to meet that obligation, we will balance our maximum-‑employment and price-stability mandates, keeping in mind that, without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans. We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension. If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close."
- We get a Q&A so may get more color on if and how his views have evolved since the start of the month.
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FOREX: NZDUSD Surges 1.2% to Fresh 2025 Highs
Mar-17 17:36
- Firmer risk sentiment on Monday has allowed the higher beta currencies to outperform in the G10 FX space. Added to this, weaker details within the US retail sales report has bolstered the softer dollar theme, allowing AUDUSD and NZDUSD to register gains of 0.93% and 1.22% respectively,
- Topside momentum for NZD has been exacerbated by the earlier breach of the 2025 highs, which has seen NZDUSD rise back above 0.5800 for the first time since mid-December. Furthermore, the solid bounce for equities is underpinning a strong move higher for NZDJPY, likely bolstering the renewed Kiwi optimism. This is the first time the cross has been above its 50-day EMA since January, having built a solid base in the low 83.00s earlier this month.
- The broad dollar offer has also assisted GBPUSD to print a fresh four-month high as the pair edges ever closer to the psychological 1.3000 mark. A close at current levels would be the highest daily close since the US election and should keep attention firmly on the November 06 high of 1.3048.
- In similar vein, EURUSD rose as high as 1.0929 as markets await tomorrow's special session in the Bundestag. Optimism over the German debt deal have been inspiring the optimism for the single currency, and the gap has been narrowing to the recovery highs of 1.0947. This level will need to be cleared before the market turns its focus to pivot resistance at 1.10 and a more notable cluster of medium-term resistance around the 1.12 mark.
- A relatively subdued session for USDJPY still saw an 80 pip range for the pair. Post data action saw an initial dip lower to 148.31 before being swiftly faded as markets latched on to the stronger-than-expected control group reading. Overnight session highs at 149.10 have capped the upside so far, and initial resistance comes in just above at 149.46, the 20-day EMA.
- German ZEW and Canadian CPI highlight Tuesday’s calendar, before the focus turns to major central bank decisions starting Wednesday.
US: FED Reverse Repo Operation: Back Below $100B
Mar-17 17:20
RRP usage retreats well below $100B to $89.496B this afternoon from $126.234B Friday. Compares to $58.770B (lowest level since mid-April 2021) on February 14. The number of counterparties at 25 from 29 prior.
OPTIONS: Larger FX Option Pipeline
Mar-17 17:20
- EUR/USD: Mar19 $1.0800(E1.5bln), $1.0900(E1.3bln); Mar20 $1.0900-10(E1.3bln); Mar21 $1.0900(E1.2bln)
- USD/JPY: Mar20 Y145.00($1.2bln); Mar21 Y149.00($1.2bln), Y149.85-00($1.7bln)
- AUD/USD: Mar20 $0.6400-15(A$1.5bln)
- USD/CAD: Mar19 C$1.4565($1.6bln); Mar21 C$1.4300($1.6bln)
