Difficult communication between central bankers and markets continues. In his speech last night, the head of the US central bank, Fed, Jerome Powell, repeated his previous views that taming inflation still requires interest rate hikes and that interest rates must be kept at their legal point for a long time before monetary policy can also be eased.

In the evening, however, strong movements were seen in the market, according to which investors interpreted the CEO’s speeches as meaning that monetary policy easing can be expected already this year or at the beginning of next year.

In the end, the reactions leveled off into a fluctuation, and the interest rates today have moved at approximately the same level as yesterday afternoon. For example, the interest rate on a two-year bond in the United States fluctuated back and forth by about nine percentage points in a short period of time.

More hawkish statements were expected from Jerome Powell, but he stuck to his previous messages. In the market, this has been interpreted as the reason why the dollar has been in a hair’s breadth decline last night and today.

“What Powell Didn’t Say”

“The dollar sell-off embodies what Powell didn’t say,” MUFG FX wrote in a client letter, according to Reuters.

“The market is looking for dove-like messages everywhere they can. Powell said interest rates may rise above market expectations, but the Nasdaq and S&P 500 rose. I thought theirs [markkinoiden] to be wrong,” Invesco’s head of macro research Ben Jones told Reuters.

At 3:20 p.m., the interest rate determined on the German ten-year reference bond market was 2.9 percentage points higher at 2.364 percent. The corresponding interest rate in the United States was 0.8 percentage points lower at 3.666 percent.

In two-year loans, the interest rate on the reference German government bond was up 1.6 percentage points at 2.693 percent, and the interest rate on the US bond was down 0.8 percentage points at 4.456 percent.

At 15:30, the euro fetched 1.0729 dollars, 140.83 yen, 0.88812 pounds and 11.351 Swedish kronor. The dollar was 131.27 yen and the pound was 1.2080 dollars.

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