There's was nothing in the FOMC statement or press conference that screamed that it was time to sell the dollar or buy risk trades but that's what happened. The biggest move during Powell's appearance was when he said that 75 bps hikes won't common, but he immediately followed that by saying the next meeting will be 50 or 75 bps.
Based on the market reaction there will be a dovish narrative, or perhaps the takeaway will be that 'the Fed is finally taking inflation seriously' or that this will mean the terminal rate is lower because of aggressive action now.
Instead of that, I'd lean more towards extremely negative market positioning and pricing in the past few days. It's been a rout and a bounce was due. There is always fear and angst ahead of the FOMC and it often unwinds. Last month, the market rallied 3% after the FOMC only to fall 13% afterwards. Historically, Fed day is the single-best day for risk trades on the calendar.
Cable has tracked risk trades closely and it's now more than 200 pips above this time yesterday.
