Forexlive Americas FX news wrap: 2024 dot falls further. No pushback from Powell.

Markets:

• Gold up $41 to $2020
• US 10-year yields down 18 bps to 4.03%
• WTI crude oil up 97-cents to $69.57
• S&P 500 up 1.2%
• Russell 2000 +3.5%
• AUD leads, USD lags

The trade since the Fed decision has been to dump the US dollar and buy everything else.

It started with the statement when it referred to ‘any’ further cuts that might be needed rather than ‘further cuts’, highlighting that the Fed is at or near the peak, something Powell confirmed later. That continued with the first looks at the dot plot, that showed the end-2024 dot at 4.6% rather than 4.9% expected, and down from 5.1% previously.

Powell threw gasoline on the fire when he offered no pushback to the market easing narrative, that’s now pricing in 142 bps in cuts next year. In addition, he officials are very focused on “not making that mistake” of holding onto high rates too long. Previously, he’s highlighted parallels to the 1970s and indicated a willingness to keep rates high for too long to make sure the job was done. Now he’s changed that tune and is trying to thread the needle.

The market certainly didn’t miss the signals with the dollar falling 50 pips initially and then significantly more, including a 240 pip drop in USD/JPY as the bulls take another battering. Elsewhere it was straighforward with dollar losses around 80 pips across the board.

Fixed income sang the same song with US 2s down 28 bps on the day to the lowest since June. Gold naturally benefitted as well, rising to $2020.

There wasn’t much shape in any of the moves as the first hints were dovish and subsequent statements made it abundantly clear. Does money come in from the sidelines now? That will be interesting given how far markets have moved already.