A tough day for the dollar, weakened – as many had expected – by Jerome Powell’s speech, eager to please the markets and confirm the start of a rate easing cycle.
The euro soared +0.7% against the dollar to 1.1180, its highest level since mid-July 2023.
The Dollar Index is down -0.7% at 100.75 (its lowest since 24/12/2023), while the Yen is up +1% at 144.75, the Pound up +0.85% at 1.3090 and the Canadian Dollar up +0.8% at 1.3500.
The Swiss Franc is the weakest on Friday, losing 0.25% against the Euro.
Gold is up +1.2% at $2.515, against a weakening dollar and depressed bond yields.
The yield on 10-year Treasuries is down -4.5pts, while the 2-year is down -8pts at 3.9300 (-12pts over the week).
An “accommodative” speech from Jerome Powell was expected, and it was: “the time has come to adjust the restrictive monetary policy pursued in the United States for over 2 years, now that inflation is falling and the job market is slowing”.
The head of the FED also advocated ‘a more accommodative approach by the US central bank, with appropriate adjustments to our restrictive policy; there are good reasons to believe that the economy can return to 2% inflation while maintaining a strong labor market’.
He was deliberately vague about the extent of monetary easing to come (including a -50Pts cut on September 18, which would be a ‘strong’ gesture), but Wall Street is well on the way to -75Pts by the end of 2024.
Shortly before listening to J.Powell’s speech, investors learned of the number of building permits issued in July: they fell slightly to 1.406 million at an annual rate in the US (but less than expected, since the consensus was for 1.396 million, after 1.454 million in June).
In Europe, the ECB reminds us that there is no urgent need to cut rates, as the economic situation does not justify it..5Pt tonight to 3.9875%.
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