The dollar fell on Wednesday after testimony from Fed Chair Jerome Powell added little to his recent pledges to get inflation under control, encouraging a sharp retreat in Treasury yields and equities rebound that reversed earlier safe-haven buying of the U.S. currency.
The post-Powell price action also trimmed previous yen gains that had been brought on by safe-haven buying.
EUR/USD rebounded sharply toward the close, up 0.42% after retesting Monday's 1.0470 EBS low, then making a 1.0606 Wednesday high as prices flirted with a close above 1.0573, the kijun and 50% Fibo of the May-June dive.
That after May and June's 1.0359/49 EBS lows held just above 2017's key 1.0340 low.
Treasury yields have fallen versus bund and JGB yields since the Fed's 75bps rate hike on June 15, the biggest since 1994, even as markets priced in similar increases in July and September.
Investors see the aggressive hikes hastening the apex of Fed tightening and the onset of the next easing cycle, dimming the dollar's allure nL1N2Y91TH.
Sterling recovered from its initial fall in response to risk-off flows, striking UK rail workers and the nearly as-forecast 40-year inflation reading nL8N2Y917G.
Its subsequent rebound was aided by recovering stocks and still depressed Treasury yields, but it did little to end the consolidation since the June 16 rebound high at 1.2405.
Though there has been some expansion of BoE rate hike pricing, they are priced to peak at 3.28% next year versus terminal fed funds at roughly 3.75% nL1N2Y91DC.
USD/JPY fell 0.34% due to the pullback in Treasury yields and initially as part of a broader haven yen rise amid risk-off flows.
The 135.68 Wednesday lows on EBS found support by the hourly cloud and 50% Fibo of this week's advance.
The swift recovery in U.S. stocks after it became clear Fed Chair Powell wasn't going to break new ground got prices back into the middle of Wednesday's 135.68-6.71 range, with 136.71 also being Tuesday's 24-year trend high.
Because the BOJ remains committed to its ultra-easy policies and the Kishida government is merely warning about the potential drawbacks of rapid yen weakening, the post-FOMC meeting pullback in Treasury-JGB yields spreads isn't doing much damage to the broader rates-driven uptrend thus far.
Above-forecast and 40-year high in Canadian inflation nL1N2Y90ZL kept BoC rate hike expectations elevated and the Canadian dollar flat against the U.S. dollar and up 0.4% against the Aussie.
Emerging markets currencies were mixed and the dollar up 0.16% against the yuan.
Bitcoin and ether were down roughly 2% and 3.7% after the prior three days recovery attempts couldn't take hold nL1N2Y91I1.
Thursday features June PMIs and jobless claims, as well as Chair Powell's second appearance on The Hill.
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