Powell definitely did not disappoint as he induced another volatility bout in markets yesterday. The dollar soared while equities slumped but the reaction in the bond market was arguably the more interesting one.
The short-end sold off with 2-year Treasury yields jumping to 5% but the long-end was bid as 10-year yields fell off instead. The former seems to be suggesting fears that the Fed will stick to the higher rates for longer narrative, but that very same view is feeding into the long-end as traders fear that will induce a deeper recession i.e. not so much a soft landing.
In any case, you can't blame the dollar for being bid though. 2-year yields at over 5% is awfully attractive, especially now that broader markets are coming around even more to the idea of the "6% trade".
Looking ahead, German data will be a focus point in European morning trade but it shouldn't be of much impact. Instead, after Powell yesterday, all eyes will be on the US ADP employment report to vindicate his remarks - even if the data has not been quite an accurate indicator recently of what to expect from the Friday jobs report.
0700 GMT - Germany January industrial production
0700 GMT - Germany January retail sales data
1000 GMT - Eurozone Q4 final GDP figures
1200 GMT - US MBA mortgage applications w.e. 3 March
That's all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.
