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Fed Chair Powell signals no rush for rate cuts

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Dollar strengthens, euro weakens amid policy divergence

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Goldman Sachs sees risk of slower Fed easing

By Stella Qiu

SYDNEY, Nov 15 (Reuters) - The U.S. dollar extended its

broad rally early on Friday, towering at one-year highs as a

hawkish turn from the Federal Reserve chief sent short-term

Treasury yields higher, leaving Wall Street futures in the red

and most Asia markets struggling.

Fed Chair Jerome Powell said there was no need to rush rate

cuts with the economy still growing, the job market solid and

inflation still above the 2% target, tempering expectations for

a rate cut next month.

Fed fund futures for next year slumped with December

off 7 ticks and imply just 71 basis points of rate cuts by

end-2025. A rate cut next month is no longer a high probability

event, with just 61% priced in, down from 82.5% in the prior

session.

That lifted the dollar across the board, especially against

the euro as expectations for more aggressive policy easing in

Europe further undermined the single currency already trading at

one-year lows.

On Friday, Nasdaq futures fell 0.4% while S&P 500

futures eased 0.3%. EUROSTOXX 50 futures fell

0.5%.

MSCI's broadest index of Asia-Pacific shares outside Japan

was off 0.1% and down 4.6% for the week, the

biggest weekly loss in more than two years.

Tokyo's Nikkei, however, gained 1.1% driven by a

pull back in the yen, which boosted the outlook for Japanese

exporters. Still, it was down 1.3% for the week.

Even before Powell spoke, producer prices data showed that

the core gauge surprised slightly to the upside, which also had

markets worried about the pace of easing ahead.

Goldman Sachs now sees a greater risk that the Fed could

slow the pace of easing sooner, possibly as soon as the December

or January meetings, while JPMorgan still tips the Fed to cut in

December though they expect the central bank could dial down the

easing pace in January.

"After the sugar hit of Trump's election and its subsequent

impacts on expectations for company profits, the market's

enthusiasm is being watered-down by greater interest rate

uncertainty, especially going into next year," said Kyle Rodda,

a senior analyst at Capital.com.

Short-term Treasury yields shot up overnight and remained

elevated on Friday. The two-year yields held at

4.36%, having jumped 6 basis points overnight to close at

4.357%.

In the currency markets, the dollar towered against its

major peers at a one-year top. It gained for five days on the

yen, up another 0.2% to 156.56, the highest since

July.

The euro nursed heavy losses at $1.0529 and is set

for a hefty weekly loss of 1.77%. Minutes of the latest meeting

from the European Central Bank showed the cut last month was

likely an insurance move.

Markets are, however, more dovish on the ECB and see a

decent 36% chance it could step up its easing in December with a

half-point move to guard against growth risks. They are also

wagering that the ECB will have to cut at each meeting until mid

next year.

The lofty dollar pressured commodity prices, with gold

prices down 4.4% this week to $2,566.45, bringing the

monthly loss so far to a sizeable 8%.

Oil are also down for the week. Brent crude futures

are set for a weekly loss of 2.1% and were last at $72.33 a

barrel.