Forexlive Americas FX news wrap 24 Jun: Powell tilts a little more dovish in testimony

The US dollar fell for the major currency pairs today. The largest decline was versus the JPY and the CHF with the greenback falling by -0.92% vs each. The dollar fell by -0.7% versus the GBP and by 0.50% vs both the AUD and the NZD.

The USDCAD was near unchanged as traders bounced that pair higher (lower CAD) helped by a sharp fall in the price of crude oil The price of crude oil fell by close to 5% today and has fallen over $10 in two days of trading. The earlier fall in the USDCAD was partially helped by a 0.6% rise in Canadian CPI for the the month of May. That put a bit of a damper on YoY inflation for – well a year.

The big economic event today in the US, was Fed Chair Powell’s testimony on Capitol Hill. He spoke to House members today and will speak to the Senate members tomorrow.

In his Q&A, he emphasized that the U.S. economy is not currently in a recession and that the labor market remains strong, with no evident signs of weakness. He noted that any emergence of labor market softening would influence the Fed’s policy outlook. For now, the strength of the economy allows the Fed to pause interest rate changes. He also stated it is too early to assess the full implications of developments in the Middle East and added that the U.S. is not facing tensions within its dual mandate of price stability and maximum employment. On housing, Powell acknowledged a longer-term structural shortage that is beyond the Fed’s control, though he maintained that restoring stability remains a key goal. He also indicated that it’s premature to comment on supply chains in any meaningful way.

On inflation and tariffs, Powell said inflation could come in weaker than expected, which would support an earlier rate cut. However, if inflation or labor market strength persists, that could delay any rate cuts. He acknowledged that projections suggest inflation may rise due to new tariffs, with the Fed expecting to see any meaningful inflationary impact in June, July, and August.

However, regarding the policy path, Powell noted that multiple scenarios remain possible, including a rate cut as soon as July—depending on incoming data. He stressed that the Fed is not in a rush and does not have a preset schedule for cuts. Policymakers will continue to monitor conditions and “wait and see” before making decisions.

He said that a clear majority still believe rate cuts will be appropriate later in 2025, although projections remain highly uncertain. Powell added that, absent inflation concerns, the Fed likely would have already resumed rate cuts. The challenge now lies in pinpointing the right timing, but he assured that once inflation pressures are truly contained, rate cuts will eventually come.

Lastly, Powell addressed current rate levels, noting they are significantly higher than near-zero rates seen in prior years, giving the Fed more flexibility to cut if needed. With rates elevated, the central bank can afford to pause. However, he reiterated that ongoing uncertainty surrounding tariff-driven inflation has kept the Fed from acting on rate cuts thus far.

A few other Fed members also spoke in the US session:

• New York Fed President John Williams (voting member) said the U.S. economy remains in a good place with a solid job market, though growth is expected to slow to around 1% this year and unemployment may rise to 4.5%. He noted that tariffs and uncertainty are weighing on the outlook, with tariffs likely pushing inflation to 3% in 2025—adding about 0.25 percentage points. Still, he expects inflation to gradually decline to 2% over the next two years. Monetary policy remains well-positioned, and while rates will eventually need to move lower, current settings give the Fed room to assess incoming data.
• Minneapolis Fed President Neel Kashkari noted that while inflation remains above the Fed’s 2% target, there has been significant progress in bringing it down. He said businesses report strong underlying fundamentals but also express concern over tariff-related uncertainty, which has added complexity to the economic outlook. Kashkari, seen by some as a potential dark horse for an early dovish pivot, did not commit to a timeline but hinted at a more cautious, data-dependent approach moving forward
• FOMC voting member Michael Barr reiterated that monetary policy is well positioned for a wait-and-see approach, aligning closely with Chair Powell’s stance. He noted the U.S. economy remains on solid footing, with low and steady unemployment and ongoing disinflation progress. However, he cautioned that tariffs are likely to push inflation higher and could also slow the economy and lead to rising unemployment. His comments reinforced a cautious stance, contributing to a pullback in market odds for a July rate cut, which slipped to 18% from 25% the day before

The comments from Powell, helped to keep – and extend – the stock gains seen after the ceasefire announcement late yesterday between Israel and Iran. That news gave stocks a bid at the start of the day, with the testimony helping to add to the buying interest. At the end of the day, the major indices rose by over 1.1% each with the Nasdaq leading the way with a gain of 1.43%.

The final numbers are showing:

• Dow Industrial average rose 507.24 points or +1.19% at 43089.02
• S&P index rose 67.01 points or +1.11% at 6092.18.
• NASDAQ index rose 281.56 points or 1.43% at 19912.53.

In the US debt market, yields of moved lower which was another tailwind for stocks:

• 2 year yield 3.818%, -1.0 basis points
• 5-year yield 3.857%, -2.8 basis points
• 10 year yield 4.292%, -3.0 basis points
• 30 year yield 4.831%, -2.8 basis points.

A look at other markets going into the end of day shows:

• Crude oil trading down $-3.50 or -5411% at $65.01
• Gold is trading down $44 or -1.31% at $3323.06.
• Bitcoin is trading up $400 or 0.39% at $105,870