Fed Chairman Powell’s address to the Economic Club of New York yesterday generated outsized market volatility leading to a EUR/USD 30-minute high/low range of 0.57%, GBP/USD range of 0.55%, and USD/MXN range 1.02%. The 10-year UST yield ranged from a low of 4.922% to 4.993% (and closed at 4.991%, a fresh multi-year high).
Currency and treasury markets have since calmed and settled back into recent ranges. Treasury prices are higher today (yields lower) with the biggest gains weighted towards the mid-curve tenors. Fed Funds Futures now imply a 20.3% probability of a Fed rate increase at the December meeting, down from a 34.0% probably only two days ago.
The broader market is in ‘risk-off’ mode today, evidenced by sharply lower global equities, and higher treasury, oil, and gold prices. The possibility of Israel’s war with Hamas spreading to a wider regional Middle East conflict is leading the shift to safe assets.
The U.S. dollar index basket is -0.05%, reflecting the dollar’s even split of gains and losses against the major pairings. The dollar’s primary gains are +0.38% vs. NOK, and +0.22% vs. NZD. Declines are -0.31% vs. CAD, and -0.08% vs. EUR & GBP.