Federal Reserve member Christopher Bostic remarks strengthened the US dollar, citing the possibility of global conflicts, which could again complicate supply chains. Bostic repeats baseline is for rate reductions starting in Q3, with care needed not to cut too soon and risk renewed demand and price pressures. US president Biden indicated that US army will continue air strikes on Houthi position, in Yemen and escalation in the Middle East may be another pro-USD factor.
CEO of the Bank of America, Moynihan said that the Fed will have to cut rates, absent a drag. The Bank of America economists sees four interest-rate cuts in 2024, each one by 25 bps. Bostic comments today were quite mixed but after very strong jobless claims reading, and higher than expected housing starts, we can expect that US economy is still in at least not bad condition, which mixed with global supply shocks risks, may be a signal of a 'higher for longer' Fed policy.
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- Given uncertainty, it's unwise for the Fed to lock in any approach at this point.
- I am open to starting rate cuts before July if there is convincing evidence that inflation is slowing faster than I anticipate.
- If inflation progress slows, it's good to keep higher longer.
- I want to see more evidence we are on trajectory to 2%, the worst outcome would be to cut rates then have to raise.
- I have seen some slowing in the labor market, it's now more balanced. Inflation seems to be on path to 2% target.
EURUSD (D1 Interval)
EURUSD loses more than 0.2% today. A further drop may be a signal, that EURUSD can test the major trend line near the 1.08 zone.
Source: xStation5
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