US Greenback Energy May Fade as Powell Downplays Fed Dot Plot

US DOLLAR, FED DECISION, POWELL PRESS CONFERENCE – TALKING POINTS

• US Greenback energy in response to the newest FOMC determination may begin to sputter
• Fed Chair Powell is softening up dot plot projections that upgraded price liftoff
• The Federal Reserve nonetheless needs to see ‘substantial additional progress’ towards targets

The US Greenback and Treasury yields are buying and selling sharply larger following the newest Fed announcement. US Greenback energy appeared largely fueled by Fed officers upgrading their dot plot projections, which now present two rate of interest hikes by the top of 2023. This overshadowed the shortage of change to language within the press assertion. Particularly, there was no specific point out of tapering asset purchases with the central financial institution nonetheless looking for to make substantial additional progress towards coverage targets earlier than slowing the tempo of its $120-billion/month QE program.

FED CHAIR POWELL DOWNPLAYS THREAT OF TAPERING, DOT PLOT PROJECTIONS

To not point out, Fed Chair Powell can be downplaying dot plot projections throughout his follow-up press convention. Powell acknowledged how FOMC dots ‘must be taken with a grain of salt,’ including that the dot plot is ‘not an important forecaster of future price strikes.’ The Federal Reserve head additionally echoed how the central financial institution remains to be ‘a methods away’ from making substantial additional progress towards its twin mandate. This dovish rhetoric from Powell contrasts the market’s hawkish learn of the press assertion. As such, there may very well be potential for the US Greenback and Treasury bond yields to pare their spikes larger whereas volatility normalizes.

— Written by Wealthy Dvorak, Analyst for DailyFX.com

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