FX Update: Biden set to give Powell a tongue lashing at the White House today? FX Update: Biden set to give Powell a tongue lashing at the White House today? FX Update: Biden set to give Powell a tongue lashing at the White House today?

FX Update: Biden set to give Powell a tongue lashing at the White House today?

Forex 6 minutes to read
Picture of John Hardy
John Hardy

Head of FX Strategy

Summary:  The US dollar got a boost overnight and today after comments from Fed Board of Governors member Waller, who argues for several more 50 basis point Fed rate hikes, rather than just the two (followed by smaller hikes thereafter) that that the market was getting increasingly comfortable with projecting. As well, US President Biden has invited Fed Chair Powell to the White House for a meeting today. Is this for a dressing down on the Powell Fed’s failure to move more aggressively against inflation?

FX Trading focus: Watching for new shifts in Fed tone as Powell headed to White House meeting today

We have the US dollar pushing back a bit higher today on two developments: the Fed’s Waller arguing for “several” 50 basis-point rate hikes, which has helped boost US treasury yields all along the curve, and as the risk bounce fades on that development, as well as on the impact of a significant further rally in energy prices. The latter was a product of the EU agreeing to a new package of sanctions that will see the elimination of all sea-borne imports from Russia over the next six months, which is about two-thirds of the usual import volumes. Pipeline flows could continue, keeping especially Hungary happy for now.

Besides the Fed’s Waller helping bring back about nine basis points of tightening onto the 2022 calendar year, we also have the headline that US President Biden has invited Fed Chair Powell to the Oval Office, a rare event that between the lines suggests Biden will do everything he can to strong arm the Fed Chair into a more forceful policy stance. Let’s recall the inflation focus in the Fed Chair’s renomination speech, together with similar comments from then Vice Chair nominee Brainard. Can’t help but note the timing here as the invite coincides with the beginning of the US driving season and possible summer of discontent just after US gasoline prices have surged to a nominal record (still solidly below the prior peak on an inflation adjusted basis). Is the Fed set to double down? The answer to this question together with the reception of the US data through this Friday’s jobs report and the beginning of QT tomorrow and whether we are set for fresh pressure to the upside in longer US treasury yields and therefore the US dollar.

If the US dollar is set to take a stand here on a fresh rise in yields after Biden refreshes Fed Chair Powell’s memory today on the necessary Fed policy pivot that was the condition for his renomination (fight inflation and don’t worry about anything else), then the sterling looks like a good place to choose shorts versus the US dollar. Nothing has suddenly improved in the UK outlook over the last couple of weeks, we have merely seen a significant bounce after an epic rout from above 1.3000 to below 1.2200. A return of the price action below 1.2500 would suggest a local reversal here and a possible setup for a run to the important chart level at 1.2000.

Source: Saxo Group

Sweden’s economy supposedly hit a speed bump in Q1, with the estimate yesterday coming in at -0.8% QoQ vs. -0.4% expected, much of it on the drag from trade as high import energy prices weighed and exports looked relatively sluggish on upward revisions of prior numbers. But credit growth suggests domestic demand is humming along nicely, despite the most recent consumer confidence reading registering the lowest level in decades as is the case in many countries. A Bloomberg article today highlights  Sweden’s commercial property sector activity in freefall after a record year in 2021 and before the Riksbank has even managed to hike rates in earnest (although the bank did achieve lift-off in April and the forward curve has seen a massive adjustment higher on the Riksbank’s dramatic reassessment of the likely policy path). Traditionally, Sweden’s economy is very pro-cyclical as it is leveraged to external demand for its products. But all of the small open economies like Sweden (and including Denmark, Australia, Canada, etc.) have seen the most aggravated of property bubbles on the many years of zero/near zero and even negative rates since the global financial crisis. On the residential side, Statistics Sweden’s average housing price indicator has risen from about 3 million just prior to the pandemic to 4 million now and up from about 2 million just after the global financial crisis. Higher yields are a massive headwind for all of these economies through the asset valuation mark-down risks. Major studies by the US Federal Reserve among others have shown that property bubbles cause enormous long-term hangovers once they pop, and Sweden’s never came close to doing so. Back in 2010-11, the Riksbank thought it could normalize and tried to do so by hiking rates to 2.0% from 0.25%, but triggered an immediate recession that saw it backtracking and cutting the policy rate to -0.5% by early 2016. Back then, the global backdrop allowed such a move, as inflation was a non-issue, particularly after the collapse in oil prices in 2015. This time around, not so much.

An interesting story out overnight flagged to me by my esteemed colleague Redmond Wong was the upward revision to 2.0% from 1.2% YoY in Japan’s March wage data, a potential game changer if similar levels or higher of wage growth are posted in coming months. The wage data series is somewhat erratic, so we can’t jump to conclusions, but it is the kind of data that would allow the BoJ to soften up its commitment to the existing yield-curve control policy.  In general, the political pressure on the BoJ can only continue to mount from her if oil prices continue higher and raise the cost of living in Japan, aggravated by the weak JPY which is almost 25% weaker in REER terms from two years ago. The JPY was a touch firmer overnight after dropping in the wake of the surge in US yields. Prime Minister Kishida is set to tout a “New Capitalism” policy push that seeks to shore up inequality risks. More to come on that effort.

Table: FX Board of G10 and CNH trend evolution and strength
Too early for this USD bounce to show up on our trend indicator, but the USD trend status looks pivotal through Friday. The commodity currencies have been trying to get something going and AUDUSD is close to last gasp resistance areas and USDCAD has been interacting with the important 200-day moving average area.

Source: Bloomberg and Saxo Group

Table: FX Board Trend Scoreboard for individual pairs.
Note the robust extension of the bounce-back in AUDNZD as a likely end to the NZD comeback attempt within than exchange rate. That pair may be ready to challenge near 10-year highs on a break of the 1.1100+ top.  Elsewhere, the Euro is suffering against commodity FX on the new Russia sanctions, EURCHF 1.0225-50 area bears watching. Finally, the GBPUSD trend reading will be easy to flip back to negative on a heavy couple of days of trading – and GBPJPY is even closer to flipping negative if the JPY perks up again.

Source: Bloomberg and Saxo Group

Upcoming Economic Calendar Highlights (all times GMT)

  • 1200 – Hungary Rate Decision
  • 1230 – Canada Mar. GDP
  • 1300 – US Mar. S&P CoreLogic Home Price Index
  • 1345 – US May Chicago PMI
  • 1400 – US May Conference Board Consumer Confidence
  • 1430 – US May Dallas Fed Manufacturing Activity
  • 0130 – Australia Q1 GDP
  • 0145 – China May Caixin Manufacturing PMI


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.