Bennie Kincaid 
The speech made by the head of the Federal Reserve to Congress has unexpectedly become a source of market disruption.
Due to Powell’s latest comments made in front of the U.S congress, the global dollar index has seen an increase in its price by 1.1%.
Powell supported the Hawkish stance of U.S Federal Reserves as a result the U.S. dollar gained momentum.
But this momentum was short-lived
According to the interest rate futures market, there is a 70% likelihood that the Federal Reserve will increase interest rates by 50 basis points on March 22nd.
The achievement is remarkable considering that just a week ago, markets had estimated a probability of only 30% for such a result.
Just a month ago, the interest rate futures investors were betting about the increase of interest rates by 9%.
But there have been interesting turns of events just within a few days. This sudden fluctuation in the dollar price has given much-needed momentum to the bonds market as well.
On the other hand, the stock market and commodity market have seen a significant price decline.
The recent resurgence in the price of the dollar did not come after the technical indicators of the dollar.
But the last night’s momentum in the price of the dollar solely came after the comments made by the Feds.
Over the Months Feds Were Making Case for Strict Policies
On the hand, market experts made the clear argument that this was the plan for the Feds for the past few months.
From the start of this year, Federal Reserve officials have been attempting to justify a more restrictive monetary policy.
It is a normal practice that the market initially ignores the risks, but eventually, the risks are realized and dealt with appropriately.
As the things stand the market has become over-sensitive to the imaginary risks posed by the Feds and economic data.
This is not a good sentiment for investors because investors are more concerned about what is happening right now instead of thinking about what will happen a few months ago.
Currently There Has Been a Divergence
The current indicators show a clear difference between the market sentiment and the Fed’s view of rising the interest rate.
Earlier in January following the market circumstances the regulators said that they are planning to bring ease to the monetary policies.
But now by the end of February, The Feds are once more talking about taking further strict actions to implement the strict monetary policies.
Market experts pinpointed that the current stance of the Feds is opposing the indicators and predictions they made at the start of 2023.
But Feds are hiding behind the higher unemployment data by making an argument that high unemployment in February has left them with no choice.
That is why spiking up the interest for an extended period is the only option to ensure economic stability. For Feds money markets are of secondary importance, their primary focus is to uphold economic stability.
Talking of the price of USD. At the press time, the price of USD saw a brisk dip. The dollar index was down by 0.09% as compared to other currencies.
The USD declined by 0.03% against the Euro. Moreover, the JPY rose higher against the USD by 0.06%.
This shows that USD has reached new lows against the JPY since November 2022. Furthermore, the AUD recovered by 0.23% against the USD, which touched the $0.6600 mark.
As the things stand, the Feds are setting up the tone of the money market. It can be argued that just within the space of 24 hours some major currencies have gone upside down.
Experts have criticized the Feds by stating that a more disciplined approach could be taken regarding the interest rate issues rather than thinking about abrupt changes.
