FX Update: Fed’s Powell testimony, Trump impeachment hearings FX Update: Fed’s Powell testimony, Trump impeachment hearings FX Update: Fed’s Powell testimony, Trump impeachment hearings

FX Update: Fed’s Powell testimony, Trump impeachment hearings

Forex 6 minutes to read
John Hardy

Head of FX Strategy

Summary:  Trump failed to provide any fresh impression on the status of US-China trade negotiations yesterday, the RBNZ shocked the market by failing to cut rates as expected, and investors can look forward to an interesting day ahead in Washington with US Fed Chair Powell testimony and the first Trump impeachment hearings.

Trump’s speech yesterday before the New York Economic Club was short on policy details and very long on self-promotion and grievances against the Democrats. On US-China trade negotiations, Trump merely indicated that a trade deal is possible but that tariffs would be raised if no deal was struck.

The RBNZ shocked us and the consensus by failing to cut rates another 25 basis points, keeping the rate at 1.00% and spiking short NZ rates higher – to the tune of 15 basis points for the 2-year rate. The RNBZ wants to see the effects of the rate cuts in the bag before signaling more easing. Governor Orr said there was no intention to surprise the market and teased that the RBNZ will release a framework for alternative monetary policy approaches early next year. The market took this as a signal perhaps that the RBNZ would prefer to stay away from ZIRP. The market has perhaps overreacted relative to Orr’s intention, but this move has scared away the bears for the moment.

Later today, the first of Trump’s impeachment hearings is set to take place, as the top US envoy to Ukraine, William Taylor and Deputy Assistant Secretary of State George Kent are set to testify, starting at 1000 Washington time, or 1500 GMT. The partisan coverage in the news media is so rife that it is impossible to get a sense of how serious the charges are against President Trump in the general public’s eye even if the objective facts point to an impeachable offense if the charges are proven true. The issue will prove a slow-burn one as hearing progress today and Friday and in coming weeks as popular polls are tracked as well as the odds of a shift in the Senate Republican support of Trump, as only the Senate can remove a president, even an impeached one. This becomes a market moving event if Senate support for Trump wobbles.

A bit later in Washington, US Fed Chair Powell will put in an appearance before the Joint economic committee. Recent US economic data has been sufficiently resilient to keep the message at wait-and-see on the economy and market expectations for a December rate cut are moving toward nil, as the market is taking this after all as a “mid-cycle adjustment”. But the balance sheet discussion and congressional questioning into the Fed’s stance on its balance sheet could prove far more interesting, especially on any stronger indication from Powell that most Fed members expect a very limited time horizon of reserve building with the $60 billion a month of Treasury purchases, that will only continue until reserves are at a specific level. This might prove more hawkish than the market expects.

Pity the kiwi trader as NZDUSD recently saw a very nice upside-down head and shoulders formation and a neckline break attempt that failed badly, but then bears have since been caught out here by the RBNZ suddenly waxing cautious on the need for further easing, which spike NZ short yields back higher and boosted the kiwi sharply higher. The 0.6425-50 area remains relevant to the upside if this rally holds and the USD strength fades again. Bears need to see this spike back higher quickly erased.

Source: Saxo Group

The G-10 rundown

USD – the greenback generally supported heading into today’s important Fed Powell testimony if he surprises on the balance sheet discussion. Otherwise, waiting for US-China trade deal status to ignite bigger trading ranges for USD pairs.

EUR – Yesterday’s ZEW survey suggests a stabilizing outlook for Germany while the current situation measures remained pegged near the multi-year cycle low.

JPY – yields have stabilized a bit overnight and offered the yen a boost, and the currency was already a bit resilient on Japanese long yields rising sharply lately, though much of yesterday’s rally was wiped out overnight – are yields at an inflection point a burning question for currencies.

GBP – sterling remains supported despite not terribly supportive data yesterday as the most recent data point – the October jobless claims, jumped 33k, matching the highest level in over eight years, while the September employment change was far less bad than expected at -58k. The run to new lows in EURGBP has been a cautious affair and hasn’t yet sparked fresh momentum.

CHF – Wolfstreet.com covers the SNB’s crazy accumulation of equities, to the tune of $100 billion – what this means for CHF is not directly discernible, but reserves would go up in smoke in a bad equity correction.

AUD – the latest Australia employment data up tonight and the most important release for the currency at the moment, due to the RBA’s focus.

CAD – the USDCAD pivoted higher, but isn’t exactly setting the world on fire as we await US-China trade deal news an relative economic developments, with the Bank of Canada inclined toward a precautionary cut to edge the BoC rate back slightly below the Fed rate if the next rounds of Canadian data are weak.

NZD – a big shock to the market overnight that could keep NZD rather bid in the crosses, especially in AUNZD if the AU employment data comes in weak.

SEK – awaiting the CPI this morning, but not seeing it as a major catalyst as the Riksbank is determined to edge away from negative rates – SEK needs fiscal stimulus in Sweden and a firmer Euro to put in a more determined show of strength than we saw recently.

NOK – Norway’s GDP nothing write home about as the mainland GDP slightly underperformed expectations at +0.7% QoQ  - EURNOK still in limbo after failing to punch down through 10.05.

Today’s Economic Calendar Highlights (all times GMT)

  • 0830 – Sweden Oct. CPI
  • 0930 – UK Oct. CPI
  • 1000 – Euro Zone Sep. Industrial Production
  • 1330 – US Oct. CPI
  • 1500 – US Congress Impeachment Hearings
  • 1600 – US Fed Chair Powell to Address Congressional Committee
  • 1910 – New Zealand RBNZ Governor Orr
  • 2350 – Japan Q3 GDP Estimate
  • 0030 – Australia Oct. Employment Change

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, 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. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such 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.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

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

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.