• US dollar longs were sold off with Fed Chairman Powell.
• However, the fall in the dollar could be considered a discount for bulls.

The US dollar, as measured by the DXY index, fell from a high of 103.49 to a low of 103.001 after comments from the Federal Reserve’s Jerome Powell broke. Powell is in his prime at The Economic Club of Washington, DC Signature Event and repeated much of what he did at the press conference that followed last week’s interest rate decision.

Key comments

The jobs report was certainly stronger than anyone expected.

The strong jobs report shows why we think this will be a process that will take a significant amount of time.

We expect 2023 to be a year of significant declines in inflation.

We probably need further interest rate hikes.

If the data continued to come in better than expected, we would certainly raise rates further.

2% inflation is a global norm and not something the Fed intends to change.

The tax authorities are concerned about the debt limit.

The debt limit debate can only end if Congress raises it, which has to happen.

Congress must raise the debt limit on time

If the debt ceiling is not raised, no one should think that the Fed can shield the economy from its effects.

I am not actively contemplating the sale of Securities.

It will be a couple of years before the decline in the Fed’s balance sheet comes to an end.

The US is “just at the beginning” of the disinflation process.

What worries him most is when disinflation will take hold in the larger service sector; he is also concerned with external events.

The US economy added 517,000 jobs in January, the most since July and well above market expectations of 185,000. Following the Non-Farm Payrolls release on Friday, ISM services data pointed to a strong services sector, adding to concerns about persistent inflation and strengthening the case for further rate hikes.

EUR/USD and US dollar reactions

However, we have seen a jolt in US dollar longs during this event, with the euro rallying, for example:

However, there was a bounce in the dollar more recently during his comments, which has plunged the euro as risk appetite waned:

This is a 61.8% retracement on the DXY Index, and a firm one at that, with support at 103.00 holding firm. Longs have been sold off, but this could be seen as a discount for the most bullish of US dollar bulls.