USD: Less help from hawkish Fedspeak? - ING

FX strategists at ING note that Fed speakers have continued to sound hawkish, but markets may now feel relatively comfortable with their current pricing.

"Fed speakers have been center stage in the past few days as markets gauged comments about the policy normalisation path following last week’s hawkish shift at the FOMC meeting. Yesterday, Raphael Bostic and Robert Kaplan’s remarks fell again on the hawkish side as they disclosed they both expect a first rate hike in 2022. Kaplan added that he is favouring asset purchases tapering to start sooner than expected on the back of a quicker recovery from the pandemic slump. The market reaction to the comments was by and large contained, with Treasury yields inching only marginally higher, equities coming under some moderate pressure late in the US session and the USD rising only against the low-yielders."

"It appears that the market pricing of Fed’s rate expectations are already sitting on the hawkish side so that additional comments indicating early tapering/hikes now have a more contained and above all short-lived impact on sensitive assets. In FX, this is being mirrored by the fact that the rebound in high-beta G10 currencies (which were the most severely hit by last week’s hawkish FOMC) paused after Bostic and Kaplan’s comments, but did not reverse."