Fed Chair Powell slashed risk appetite in a hawkish first-day on Capitol Hill. Powell said that the Fed will likely need to raise interest rates more than expected due to the recent strong data and is prepared to move in larger steps if the “totality” of incoming information suggests more needs to be done to bring down inflation.
After Fed Chair Powell assured markets that policymakers were comfortable with taking the rate hike campaign much higher, US stocks didn’t stand a chance. Powell is not going to take any chances, and wants to make it clear that the Fed will do anything necessary to lower inflation.
The King Dollar has returned, as Wall Street scrambles for more Fed rate increases and potentially larger rates. As the 2-year broke above 5.0%, we saw significant moves in fixed income. This was the highest level since 2007. Today was a happy day for hedge funds, who were selling Treasuries aggressively. Also, the 2-year/10 year curve inversion reached 1 percentage point (103bps) in the bond market. This was the highest inversion in more than 40 years.
Dollar dominance won’t likely remain the dominant theme throughout the rest of the year, but positioning suggests it could thrive in the short-term.
Crude prices were hit by a…