Forexlive Americas FX news wrap 7 May: Fed and Chair Powell stays noncommitted

MARKETS:

USD moves higher vs the major currencies

• EUR +0.59%
• JPY 1.01%
• GBP 0.64%
• CHF 0.16%
• CAD 0.43%
• AUD 1.06%
• NZD 1.18%

US stocks moved higher for the first time this week:

• Dow +0.70%
• S&P +0.43%
• Nasdaq +0.27%

The US yields move lower:

• 2 year yield 3.780%, -0.8 basis points
• 5 year yield 3.864%, -3.3 basis points
• 10 year yield 4.271%, -4.7 basis points
• 30 year yield 4.774%, -3.8 basis points

In other markets:

• Crude oil $-1.15 or -1.95% to $57.93
• Gold $-68.50 or -1.99% at $1368.50
• Bitcoin $-420 and $96,394

The big event was the FOMC rate decision. The Federal Reserve Rates unchanged. In their statement, the Fed did acknowledge that there was a higher risk of unemployment moving higher:

• “The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”

During his press conference,Fed Chair Jerome Powell struck a cautious and data-dependent tone in his May 7 remarks, balancing acknowledgment of economic resilience with concerns about elevated uncertainty. While Powell described the U.S. economy as “solid” and the labor market as “broadly in balance” and consistent with maximum employment, he also pointed to sharp declines in consumer and business sentiment and noted that many households and firms are postponing decisions. The effects of recent policy shifts—especially in trade, immigration, and regulation—remain unclear, with tariffs cited as significantly larger than expected. Powell warned that if sustained, these tariffs could drive inflation, either temporarily or persistently, depending on how circumstances evolve.

Inflation remains somewhat elevated, but Powell emphasized that the Fed’s goal is to ensure any price increases from policy shocks like tariffs do not become entrenched. He reiterated that the current stance of monetary policy is well-positioned to respond as needed but stressed there is time to wait before adjusting rates. The cost of waiting, he noted, is “fairly low.” During the Q&A session, Powell underscored that the implications of current risks are still unknown and that the Fed doesn’t yet have enough clarity to determine if cuts are appropriate. He acknowledged cases where no cuts may be warranted, and others where easing could be justified.

Despite the rising downside risks—including the potential for both higher inflation and higher unemployment—Powell said recent data, such as initial jobless claims, do not yet reflect broad economic deterioration. Still, the Fed is closely watching for any material impacts in the data and stands ready to act when greater clarity emerges. Overall, the message was clear: the Fed remains patient, pragmatic, and guided by unfolding evidence rather than preemptive moves.

US stocks traded higher and lower through the press conference but was extended to the downside after Powell was finished. However just before the close there were reports from Bloomberg that Pres. Trump will not enforce the AI diffusion rule on chip exports. That sent chip stocks higher and the major indices along with it.

At the end of the day, Nvidia shares rose $3.52 to $117.06 after trading as low as $112.28.