We saw a Dollar rebound yesterday, but that may not last long, economists at ING report.

Yellen is the new Powell

“The most obvious symptom of how the Fed has lost its grip on the market is US Treasury secretary Janet Yellen ‘stealing’ Fed Chair Jerome Powell’s spotlight as a market driver. This happened blatantly on Wednesday when a dovish Fed hike was out-shadowed by Yellen’s backtracking on a ‘blanket’ bank deposit insurance. Yesterday, she offered some reassurance to markets in that sense, saying: ‘Certainly, we would be prepared to take additional actions if warranted’.”

“Markets seriously struggle to see the US small bank troubles being resolved without substantial support from the government. Ultimately, this continues to endorse our baseline bearish bias on the Dollar, as a situation that neither develops into a fully-fledged systemic crisis (which would be USD positive) nor significantly improves on the US regional banking side which should keep markets betting on Fed easing later this year.”

“At the moment, there are around 90 bps of cuts priced in, starting in July, and the unclear Fed communication is doing very little to reliably push back against those.”