No Such Thing as a Hawkish Pause? USD Overrated?

No Such Thing as a Hawkish Pause? USD Overrated?

Market skepticism about the “hawkish pause” and doubts about the US Fed’s ability to make tough decisions, especially concerning rate hikes.

Has the market adopted the term “hawkish pause” to bolster USD bids? It could be possible that, in an attempt to drag out USD strength just a little bit longer (euro has weakened –4.20% in past 6 months), the term Hawkish Pause has been thrown around with not-enough criticism.

Not many people have confidence in the US Fed to really make the hard decisions (transitory inflation anyone?), including being able to start up the rate hiking engine again (this year or next) after a few pauses. If they do, will they do it in a timely manner?

Jerome Powell, this morning noted in his public address that the committee hasn’t discussed what it might plan for its December decision but dismissed the idea that it would be difficult to start hiking again (if the conditions in the market require such an action). There are two more inflation readings and two more labor market readings before the last decision of the year.

Maybe investors have shrugged off the hawkish pause rhetoric this morning though. The Australian dollar is pumping, up 0.94% at last look, while the dollar has fallen more than half a percent against the yen. The EURUSD is only up 0.16%.