FX Update: USD pops anew on shrug of Powell’s shoulders FX Update: USD pops anew on shrug of Powell’s shoulders FX Update: USD pops anew on shrug of Powell’s shoulders

FX Update: USD pops anew on shrug of Powell’s shoulders

Forex 3 minutes to read
John Hardy

Head of FX Strategy

Summary:  The USD rise accelerated steeply yesterday as Fed Chair Powell largely shrugged off the move higher in US treasury yields. And USDJPY went nearly vertical overnight on intervention against rising yields at the long end of the yield curve. The US dollar is now strong across the board and the countdown to the next Fed intervention is underway, but the USD wrecking ball will likely do more damage first.

FX Trading focus: USD rally accelerates on Powell and Kuroda comments

As we thought was likely, Fed Chair Powell failed to signal a sufficient level of concern on rising US treasury yields yesterday to soothe this market, which threw another tantrum, sending treasuries lower and yields soaring, and sending equities into a new tailspin while the US dollar went nearly straight up. As our Steen Jakobsen writes in his piece today, the Fed will eventually act, but only once financial conditions are sufficiently dire to give him the cover to do so, as he can argue that sharply weaker financial conditions would feed through to Main Street USA and present disinflationary and labor market risks. And as we pondered on this morning’s Saxo Market Call podcast, the Fed may be happy for some measure of speculative froth to come out of this market rather than to be seen riding too quickly to the rescue. For now, it is worth noting that the USD has taken out new local highs against every currency in the G10 now save for CAD and NOK, where oil prices spiking on Saudi Arabia’s taking a stand on not increasing production at yesterday’s OPEC+ meeting has kept the petro-currencies divergently resilient.

And overnight, the Bank of Japan’s Kuroda made comments rejecting the notion in a parliamentary hearing that the BoJ is ready to expand the range of trading for Japanese government bonds. The 10-year yield was smashed back lower to around 0.07% after rising as high as 0.15% recently. (let’s recall the irony that the original YCC from the BoJ was intended to prevent the 10-year from going too negative to avoid excess damage to the financial system). More observations on USDJPY below.

Today, we watch and wait for whether the market is sufficiently interested in US employment data to bother reacting to it, and whether we have a paradoxical setup today in which terrible data would be celebrated for the implications for the Fed and treasury yields and great data would be fretted with further risk off.

Stay careful out there – the weekly close will be an important determinant for whether this market can pull itself together of its own volition or will continue to deleverage until central bank action is forthcoming. It is certainly a different ballgame for many portfolio managers this week, who have seen significant losses on their equity holdings, with no offsetting gains on their bond holdings. That positive correlation in equities and stocks at time this week – especially yesterday – is a game changer for trillions of dollars’ worth of money under management that has been based on the assumption that bond and equity prices normally move in negative correlation as they have for much of the last more than twenty years. Historically, they are more often positively correlated.

Graphic: G10 FX Trends
The latest update of the FX Tradeboard, which shows the trend strength in the G10 currencies (a prop measure of the strength of the trend relative to an exponential moving average of the recent trading range). Note that today I have added the momentum shift readings (the delta of the trend reading from two days ago and from five days ago), which shows how quickly the US dollar and NZD have shifted the most in trending terms over the last five days. Readings over an absolute value of six or higher are quite remarkable.

Source: Bloomberg and Saxo Group

USDJPY upside action accelerated again overnight as BoJ Governor Kuroda rejected the notion that the Japanese yield curve should be allowed to lift, which smashed long JGB yields back lower. To me, the pace of recent gains in USDJPY is getting to be too much too fast and will inevitably hit a brick wall at some point down the road – either once the Fed steps in with something to counteract the move in yields (a longer term inevitability), or, perhaps more likely in the near term, when the move higher simply exhausts itself of its own accord. A reversal in all JPY crosses would prove most climactic if asset markets tank badly and finally trigger a bid into bonds. But for now, traders shouldn’t dare step in front of an onrushing train and should consider JPY call option strategies for any contrarian trading notions to the present trend – with a measure of patience and building a position over multiple sessions. Next big round level is 110 here.

Source: Saxo Group

Upcoming Economic Calendar Highlight (all times GMT)

  • 1330 - US Feb. Change in Nonfarm Payrolls 
  • 1330 – US Feb. Unemployment Rate 
  • 1330 – US Feb. Average Hourly Earnings 
  • 1330 – US Jan. Trade Balance 
  • 1330 – Canada Jan. International Merchandise Trade 
  • 1500 – Canada Ivey PMI  

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


The Saxo 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 is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, 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 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 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 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 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 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.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo 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 Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning 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. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

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

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 are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

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.