Chair Powell could have been super balanced, or even hawkish. But he effectively chose to endorse the market discount for a rate-cutting phase ahead. It's had quite the reaction. Risk assets are up, the dollar down, so's the front-end yield. Watch longer tenor yields though - the deep thinkers of the bond market, and not quite convinced cuts are all good, ING's Regional Head of Research Padhraic Garvey and FX analyst Chris Turner report.

Dollar gets hit, and more to come

"As soon as FX traders saw the headline reference to ‘adjusting policy’, the dollar came off sharply – falling nearly 1% against some of the major currencies. The speech supports the conclusions made after the July jobs report that the Fed could move in September after all. This speech comes at a time when the market has largely priced out expectations of any further easing from the ECB. And at a time when the market is seriously considering another rate hike from the Bank of Japan in October."

"Lower short-dated US rates also feed into the narrative that foreign investors can increase their FX hedge ratios on their holdings of US assets. We’ve got targets of 1.17 and 145 for EUR/USD and USD/JPY at the end of this quarter. And if we’re right about a series of Fed rate cuts into year-end, EUR/USD and USD/JPY could be trading 1.20 and 140, respectively."

"EM high-yielding currencies, already favoured by global investors, should continue to do well too. Within the G10 space, we also think the activity currencies should outperform. Bullish steepening of the US yield curve is normally good for commodity currencies. We think AUD/USD could play a little catch-up here. And with equities continuing to do well, seemingly on a Fed cutting rates without a recession, the high beta and undervalued Scandinavian currencies should also do well."