US: Global risk sentiment took a hit, post Powell - ING

Global risk sentiment took a hit after what was perceived to be a hawkish debut testimony from Fed Chair Powell, according to Viraj Patel, Research Analyst at ING.

Key Quotes

“Investors latched onto his comment that the US economic outlook has improved since Dec – with some corners of the market seeing this as a signal for potentially 4 Fed rate hikes in 2018. Yet, we note that it may be a tall order for the median 2018 Fed funds rate dot in the March FOMC projections to move higher; it requires 4 of the 6 FOMC members that are currently calling for 3 rate hikes in 2018 to upgrade their rate hike views to 4 rate hikes this year (we assume new FOMC member Marvin Goodfriend is one of the 4 here). Hence, there is a strong risk of a dovish disappointment at the March FOMC meeting – meaning the US dollar may have overreacted to Governor Powell’s comments yesterday.”