Forex Today – 05/02: Powell Says March Rate Cut Unlikely

In an interview, Fed Chair Jerome Powell says a rate cut in March is unlikely, hinting at 3 rate cuts this year starting in May.

1. A few hours ago, the Chair of the Fed Jerome Powell gave an interview in which he reiterated that inflation is slowing, the economy is healthy, and that the Fed will most likely not cut rates in March. This continues a shift away from an expectation of rate cuts beginning in March. The notable impact was a further jump in US treasury yields, which were also given a boost by Friday’s much stronger than expected non-farm payroll data. Tahe CME’s FedWatch tool showed the chances of a March rate cut dropping sharply, with only a 17.5% chance, compared to an assessment of a 36% chance last Thursday. This will likely provide a headwind against the US Dollar and maybe US stock markets too, although major US stock indices are near their record highs.
2. Friday’s Non-Farm Payrolls data was significantly higher than expected, with 353k net new jobs created when only 187k were expected. Average hourly earnings rose by 0.6% month-on-month which was a surprisingly high number. The unemployment rate fell unexpectedly from 3.8% to 3.7%. These data show the US economy is still running hot, making rate cuts potentially inappropriate.
3. In the Forex market, the New Zealand Dollar has been the strongest major currency since the Tokyo open today. The Swiss Franc has been the weakest. The greatest volatility recently has been seen in the USD/JPY currency pair.
4. Cocoa futures reached a new multi-year high price Friday, which will keep trend traders interested in this commodity on the long side. It has been exhibiting a powerful bullish trend for well over one year.
5. There will be a release today of US ISM Services PMI data.
6. As it is Monday and there is little high-impact data scheduled for release today, it will probably be a relatively quiet day in the financial markets.