Powell's dovish change causes massive sell in greenback

• Forex today was quiet in Powell Showdown where a change in the rhetoric of the Fed has propelled the dollar into a cliff and US yields have regained their origin and the levels reached last time at the end of last week.
• Fed Chairman Powell said the rates "were just below neutral" and that US equities had responded favorably (S & P500 + 2.30% / NADAQ + 2.95%). DJIA + 2.50%).

After a European market-centric session, Federal Reserve Chairman Jerome Powell and Bank of England Carney were somewhat moderate (DAX rose 0.16% at the New York session). , but lost 0.1% to close at 11,298.88).

And then Powell hit …

The critical comment in the speech that launched the market was as follows: "Interest rates are still low by historical standards and they stay just below the wide range of estimates of which level would be neutral for the economy. " This contrasted sharply with the sight of early October, when Powell said, "We can go beyond the neutral position, but we are far from the neutral position at this point, probably."

The dollar index has collapsed to a low of 96.69 to 38.2% from fibo and a little less from the bottom of November 26th. The lowest also corresponds to the trend support of the companies traded against the greenback on November 20th. This level is crucial because it keeps a cut of the hollow of November 20th, of the handle with 96 and levels brought back in the middle of the 95, the last one exchanging on November 7th. The 10-year US Treasury yield went from 3.07% to 3.04%, while the 2-year yield went from 2.84% to 2.79%. Futures on Fed funds continued to weigh 80% on the next rate hike on December 19th.

Regarding the data, US GDP in the third quarter (2nd estimate) was not revised to 3.5% annualized, although analysts at Westpac Banking Corporation explained that the details showed a more balanced composition. of growth. New home sales fell 8.9% in October. In the previous month, upward revisions were made from -5.5% to + 1%, but this still left tracking new home sales on the weakest side. All regions posted declines.

The Bank of England and the Treasury have published scenario analyzes for Brexit, with in the worst case scenario a non-transaction scenario at Cliff Edge, dropping GDP by -10% and the pound sterling. 25%.

Currency action

The EUR / USD was relatively stable throughout the European session around 1.1280, trading slightly in New York, -0.04%. However, due to Powell's tone change, the individual unit has reached 1.1386 due to a drastic change from October's comment on neutrality. "We can go beyond the neutral position, but we are probably far from the neutral position at this point." Eurodollar and US dollar yields fall as the Fed eases off, sending EUR / USD through 10 and 21 DMAs, as well as Nov. 26th, leaving the bullish technical outlook with a bull engulfing the formation of candles.

Cable originally made an offer to announce that Teresa May could eventually allow Parliament to amend the Brexit agreements. However, these gains were offset by the Bank of England's analysis of the significant negative impact of a Cliff Edge and a messy Brexit. In the face of a lost battle in Parliament, British Prime Minister Teresa May allows Parliament to vote on a series of amendments to its Brexit agreement before the vote on the agreement (11 December). This may include votes on a possible second referendum or the request by the government to seek a customs union with the EU when, otherwise, the Prime Minister had the intention to block the changes made to it. agreement. In the current state of affairs, the votes are not favorable in May and a Brexit without agreement remains a very real possibility. At the same time, the Bank of England estimates that, in the worst case scenario, a disorderly Brexit could reduce UK GDP by 8%, housing prices by 30% and GBP by 25%, leaving cable, below current levels, below parity at 0.9600. As far as the cross is concerned, the bears have made a downward journey, their price being between 0.8875 and 0.8810. The EUR / GBP pair, however, stabilized at 0.8856.

The USD / JPY fell from 114.04 to 113.44 on the "just below", not "far" from the neutral rate commentary. A more data-dependent Fed should probably limit the widening of the JP / US gap. Everything will now depend on the outcome of the Xi / Trump summit, but it's hard to say whether the dollar could be bumped into a negative outcome that could drive the yen much higher in an environment without risk. At this point, as US benchmarks have stabilized, the yen stalls against the greenback in 113.40. For the commodity complex, it was generally higher in the context of a weaker dollar and had an impact on the Australian dollar. The AUD / USD climbed to 0.7326 after a stable start of the day between 0.7220 and 0.7240. The yield gap between the European Union and the United States has tightened sharply and the AUD / USD has crossed the 0.73 mark, hitting the 10-DMA on the way to the US. Nov peak at 0.7337, leaving the tech chart higher as RSI rises and the pair stays above 10 DMA and daily cloud.

As for gold, for delivery in December, it rose $ 10.20, or 0.8%, to settle at $ 1,223.60 / ounce after reaching a minimum of 1 $ 210.50. We now move to Gold for February deliveries, which now have a higher open interest volume, adding $ 9.90, or 0.8%, to close at $ 1,229.80 / oz. The spot price of gold rebounded from $ 1,213 to $ 1,224 the "just below", not "far" from the neutral comment rate. Gold has more to do with a weaker dollar, especially if one thinks that the US economy will slow down and if the Fed's rate hike campaign ends much sooner. The DJIA gained more than 600 points as investors interpreted comments by Fed Chairman Jerome Powell on interest rates, or ended up 2.5% higher at 25,366. 43.

Key notes of the American session:

Key upcoming events:

Analysts in Westpac note that Australian private investment in the third quarter is expected to increase 1.0% after the 2.5% drop in the second quarter:

Westpac expects a 0.4% increase with buildings and structures overall flat, while equipment spending increases by 0.8%, reversing the 0.9% decline in Q2. 2018/19 are estimated at AUD 108.5 billion.The sectoral composition of the capex plans is important in determining whether the upward trend in non-mining investment will continue until 2018/20. "