The USD has reacted more to the downside after Powell puts out balance sheet run off to "perhaps later in the year". The Fed minutes recently added that potential to the taper and tightening, and market commentary over the weekend moved toward the idea of quantitative tightening as well (that is more than the run-off of the maturing balance sheet).
Fed's Mester mentioned the idea this morning but did say that the Fed needed to communicate specific details of that taper.
The reaction has been steady dollar selling. In other markets
- Stocks are higher with the NASDAQ now up 102 points or 0.68%. The Dow is still negative however at -105 points. The S&P is modestly positive by 5.66 points or 0.12%.
- Crude oil is back above the $80 level currently trades at $80.84. That's up nearly $2.60 on the day.
- Gold is higher by $13 or 0.74% $1813.84.
- The 10 year yield is down to 1.76% and back modestly negative on the day
In the forex:
EURUSD:
The EURUSD has now moved to a new session high and looked toward the next swing area between 1.1354 and 1.1359. Earlier, the price did dip back below the 100 and 200 hour moving averages only to reverse quickly back to the upside (at 1.1320 area).
GBPUSD:
The GBPUSD is back up testing the high for the day at 1.36189. IN the process the price has moved above the upper swing area between 1.3597 and 1.3608. The 1.3597 level is now close risk intraday. Note that the pair got going to the upside after bottoming right at the 100 hour moving average near 1.35619 (see blue line in the chart above). The inability to move below that level, kept the buyers more in control despite the failure on the break higher today.
USDJPY:
The USDJPY moved up to test its 100 hour moving average at 115.664, and has moved back below its lower 200 hour moving average at 115.557. Stay below the moving averages keeps the sellers happy.
MORE on balance sheet run off from the Fed chair:
- Fed will talk about balance sheet at the January meeting
- The maturity structure of the balance sheet is much shorter in duration than in the past
- The runoff of the balance sheet can be faster
- We are in a position to provide guidance at coming meetings
- Tend to take 2, 3, 4 meetings to work through details
The comments are perhaps less dovish than his earlier comment as he is more detailed in his response.