Dollar softens on the “Powell Put”


July cut on the cards

Fed Chairman Powell’s first day of testimony on Capitol Hill had a dovish bias which appears to have paved the way for a July rate cut. Market pricing would seem to agree, with markets assigning a 100% probability of a cut on July 31; 75.5% for a 25bps reduction and 24.5% for a 50bps slash.

Powell stated that the recent uncertainty around the trade war with China and the global economic outlook outweighed any strength in the labour market, adding that June’s surprisingly strong employment report had not shifted Fed thinking.

Having said that inflation remained muted and is only seen rising gradually in the near future, tonight’s release of US CPI data for June could carry more weight than usual. A below-forecast number would almost certainly cement a July rate cut, and possibly fuel talk of deeper cuts before year end.

The dovish bias gave Wall Street a boost, pulling the SPX500 to record highs, breaching the 3,000 mark briefly for the first time before paring gains into the close. Asia has taken the index back higher again and it is currently sitting on the 3,000 handle.


SPX500 Daily Chart

Source: OANDA fxTrade


Dollar extends slide

The US dollar weakened in response to Powell’s testimony and that softness continued into today’s Asian session. The US Dollar Index, a measure of the greenback’s value against six major currencies fell to the lowest in a week. USD/CHF has slumped almost 1% from its near-term peak on Tuesday and multiple moving average crossovers suggests that the downward bias will continue in the medium term.


USD/CHF Daily Chart

Source: OANDA fxTrade


US consumer prices in the spotlight

As mentioned above, today’s release of US June inflation data will be the key event on the calendar. Forecasts suggest a slight uptick on a monthly basis, +0.2% m/m from +0.1% but a slightly softer 1.6% reading from 1.8% on an annual basis.

Fed speakers are out in force after Powell’s second day of testimony, with Williams, Bostic, Barkin and Kashkari all in the slate. No doubt they will be repeating the same theme of Powell’s testimony.

German CPI revisions will also be released. The first estimate was +0.3% m/m and +1.6% y/y. The Bank of England will release both its Financial Stability Report and minutes of the last meeting while the ECB also publishes the minutes of its meeting.

The full MarketPulse data calendar can be viewed at



This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Andrew Robinson

Andrew Robinson

Senior Market Analyst at MarketPulse
A seasoned professional with more than 30 years’ experience in foreign exchange, interest rates and commodities, Andrew Robinson is a senior market analyst with OANDA, responsible for providing timely and relevant market commentary and live market analysis throughout the Asia-Pacific region. Having previously worked in Europe, since moving to Singapore he worked with several leading institutions including Bloomberg, Saxo Capital Markets and Informa Global Markets, proving FX strategies based on a combination of technical and fundamental analysis as well as market flow information. Andrew began his career as an FX dealer with NatWest and the Royal Bank of Scotland in the UK.
Andrew Robinson

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