Australian dollar nears one-month low as the US dollar surges and the mood darkens

AUDUSD daily chart Jan 26

The US dollar is ripping higher in a ‘risk off’ trade as Powell plays up rate hikes, puts 50 bps on the table and says interest rates can go up ‘quite a bit’ without hurting jobs. He also said inflation risks have moved up.

Most expected him to handle the market with kid gloves, instead he’s tossing gasoline on the equity market fire.

Bond yields have moved up and the US dollar is surging. You have to start thinking about pricing in 3% terminal Fed funds here rather than 2%.

AUD/USD is in a vulnerable spot, having dropped to 0.7100 from 0.7170 at the outset of the press conference. The low this week of 0.7090 is within easy striking distance.

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