The USD moved higher on Thursday, bolstered by an uptick in yields of U.S. Treasury securities. This came despite the current account deficit for Q1 coming in wider than forecasted, and jobless claims topping 260k for the third consecutive week (weaker employment). Federal Reserve Chair Powell testified on Capitol Hill (this time in the House) and reiterated view expressed yesterday in the Senate .

Regarding the economy's pace, Powell highlighted a careful and slow approach in recent adjustments, emphasizing the proximity to the 'destination on rates'. His remarks underscored the Fed's cautious policy adjustment approach to avoid overshooting. On inflation and the labor market, Powell expressed anticipation for inflation to decrease throughout the year and for the labor market to continue cooling gradually. He, however, acknowledged a lack of progress in services inflation and recognized a long journey ahead in terms of meeting monetary policy targets.

Concerning the labor market, Powell outlined a path for inflation to continue falling with only a minor increase in unemployment, expressing his wish for labor market loosening to occur through other means rather than unemployment. He also acknowledged an absence of consensus on how long monetary policy takes to impact the economy but estimated it to be around a year.

Powell reiterated the potential for more rate hikes this year, with the possibility of two more on the horizon. He clarified the decision to keep rates on hold, which was designed to provide more time for decision-making, signaling the Fed's continued cautious approach. The comments were in line with the ones made during yesterday's testimony in the Senate.

The USD is ending the day as the strongest of the major currencies while the JPY is the weakest. The USDJPY was the biggest mover with a gain of near 1% on the day, and the highest level since November 10, 20222. .

USD
The USD is the strongest and the JPY is the weakest

The USDJPY traded to a w high for the year at 143.22. The move took the price above 61.8% of the move down from 2022 high at 143.50. That is now the risk (down to 143.246). The door opens for more upside as long as the price continues to trade above the aforementioned levels. The next key target area comes between 144.98 to 145.90 (see post here).

USDJPY

The GBP exhibited volatility in the wake of the Bank of England's decision to hike rates by a larger-than-expected 50 basis points. Although this decision led to an initial spike in the GBPUSD, it soon fell back on concerns about the impact of tighter policy, rising mortgage rates, and fears of a potential recession. The GBPUSD trades between the 100 hour MA above at 1.2773 and the 200 hour MA below at 1.27136. The current price is between the two levels at 1.2744.

GBPUSD

The Swiss National Bank (SNB) raised rates by 25 basis points as expected. The USDCHF fell on the news, but snapped back higher extending above its 100 hour MA at 0.8956. However, late selling in the US session push the price back below that moving average level. The central bank hinted at the need for additional rate hikes in the future.

USDCHF

As we move forward, the market's attention on Friday will be on Flash Purchasing Managers' Indexes (PMIs) in Europe and the US.

A snapshot of other markets today are showing:

  • Crude oil fell by over $3 or -4.25% to $69.45 as concerns about slower growth from central bank hikes weighed on the market
  • Gold prices fell sharply on the back of the higher dollar and higher rates. The price is down $-19.11 or -0.99% at $1913.18. The price is trading at the lowest level since March
  • Silver is down $0.41 or -1.81% at $22.23. It trades at its lowest level since March as well
  • Bitcoin is trading back above the $30,000 level at $30,162

In the US stock market today, the NASDAQ and the S&P snapped 3-day losing streaks. The major indices are still on track for a down week. The S&P is on track to snap a string of 5 consecutive weeks with higher closes, while the NASDAQ index is on track to snap its 8 week win streak. For today

  • Dow industrial average fell -4.81 points or -0.01% at 33946.72
  • S&P index rose 16.22 points or 0.37% at 4381.90
  • NASDAQ index rose 128.40 points or 0.95% at 13630.60

For the trading week, going into the last trading day of the week:

  • Dow industrial average is down -1.03%
  • S&P index is down -0.63%
  • NASDAQ index is down -0.43%

In the US debt market, yields move higher despite the weaker initial jobs data as the markets react to the expectations that the Fed is a long way from cutting rates and likely to raise rates further:

  • 2-year yield 4.795% +8.8 basis points
  • 5-year yield 4.045% +9.1 basis points
  • 10-year 3.796% +7.4 basis points
  • 30-year yield 3.873% +6.4 basis points