**US Dollar Yields Lower After Powell Comments, GBP/USD Holds Ground**
*Based on the original work published by Matt Weller at FOREX.com*
The forex landscape shifted as US Federal Reserve Chairman Jerome Powell’s remarks spurred declines in US Treasury yields and the US dollar, while pairs such as GBP/USD showed resilience and even slight gains. The nuances of Powell’s messaging, underlying data, and the broader macroeconomic backdrop are all shaping currency flows and trading tactics.
This article reviews the key themes from Jerome Powell’s appearance, the yield reaction, and consequent movements in major forex pairs, focusing particularly on GBP/USD and wider USD trends.
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## Powell’s Dovish Turn: Key Takeaways
On the 4th of June, 2024, US Fed Chair Jerome Powell delivered comments that investors interpreted as marginally dovish, further stoking expectations of a less hawkish monetary policy stance.
– **Powell’s Message**
Powell expressed that while inflation remains above the Fed’s 2 percent target, there is progress, and the policy is well positioned. He avoided stoking fears of imminent rate hikes and instead struck a tone suggesting patience regarding further tightening.
– **Market Perception**
The market had been poised for any indication the Fed might need to resume hiking rates due to sticky inflation. Powell’s remarks downplayed this risk, and market-based odds of a rate hike in 2024 faded further.
– **Key Excerpts**
– The labor market has returned to better balance
– The policy rate is “well into restrictive territory”
– Inflation has eased, and the Fed’s policy is disinflationary
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## Treasury Yields and the US Dollar React
A direct result of Powell’s guidance was a retreat in US Treasury yields. Lower yields typically reduce the appeal of the US dollar versus yield-seeking investors and traders.
– **Yield Movements**
– The US 10-year Treasury yield retreated below the 4.40 percent threshold, trimming a recent string of gains.
– Front-end yields, such as the 2-year, also softened as markets pared back further-rate-hike risks and possibility of higher-for-longer rates.
– **US Dollar Index (DXY)**
– Following Powell’s remarks, the US Dollar Index slipped from session highs near 104.30 to below 104.
– This decline continued the recent sideways-to-lower drift as markets await more clarity on US inflation and Fed policy.
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## GBP/USD: Sterling Holds Firm
One of the most notable reactions occurred in GBP/USD. The pair managed to recover modest ground amid the softening US dollar after Powell spoke.
**GBP/USD: Key Factors Supporting Sterling**
– **Relative Yields**
– The Bank of England has also struck a cautious stance, but UK inflation is still running above the BoE’s target, slowing the case for aggressive rate cuts.
– Gilts (UK government bonds) yields have been more resilient, narrowing the yield gap against US Treasuries.
– **Recent Data**
– UK wage and inflation data remain elevated, and while the BoE’s concerns about growth linger, officials are signaling a gradual, not abrupt, policy move.
– **Political Backdrop**
– UK General Election uncertainty provides some volatility, but traders see less risk of a fiscal or monetary shock.
– Markets are speculating that any new administration will likely continue prudent fiscal policy to maintain credibility.
**Technical Analysis: GBP/USD**
– The pair stabilized above 1.2700, testing its 100-day moving average.
– Previous swing lows near 1.2680 are now a key support zone.
– Upside resistance sits at 1.2800 and 1.2850.
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## Broader USD Trends
Powell’s comments signaled a cautious approach and underscored the market’s transition phase.
**Key
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