Rates as of 0500 GMT
Just as Monday was a mean reversion day, Tuesday was a momentum day. Currencies tended to keep going the way they were going.
This is the same graph as I had yesterday, except the 450 line is facing the opposite way. In this graph, currencies that are on the line are those that moved the same percentage in the same direction both Monday and Tuesday. You can see that while the relationship isnt perfect, its pretty good.
What was the trigger? Again, probably nothing in particular just a reversal of the previous panic. Perhaps the markets were comforted by calm words from various Fed officials. New York Fed President Williams V, who Monday said rate hikes were quite a ways off. Tuesday said they were still way off in the future. Cleveland Fed President Mester NV said shed prefer to see how things evolve over the summer before deciding, particularly with regards to the labor market. When we get to September, Ill think well have a little more clarity and then we can make decisions about our monetary policy, she said.
Of course, the most important comments were from the Big Kahuna himself, Fed Chair Powell, who testified before the House Select Subcommittee on the Coronavirus Crisis. As expected, there were a lot of questions about inflation. Powell didnt say anything different from what he said in his comments after the FOMC meeting most of the rise in inflation is due to transitory effects arising from the reopening of the economy, but…