Fed To Slow After Summer?
The June FOMC minutes released yesterday gave some vital clues as to the Fed’s likely plans over coming months. There was a great deal of discussion around upside inflation risks and the need to aggressively tackle soaring prices. With this in mind, the market is widely expecting the Fed to action a further .75% hike this month. However, beyond the near-term, there is now the prospect of at least a slower pace of hikes. In the minutes, the Fed noted that it would be “well positioned to determine the appropriate pace of further policy firming” once its policy rate was “near or above estimates of its longer-run level later this year.”
USD is cooling a little on the back of the release as traders mull the prospect of a slower pace of tightening after the summer. However, this is all still very much dependant on the path of inflation and, with the Fed warning that it sees little chance of upside inflation drivers subsiding near-term, any further acceleration in inflation might well require the Fed to continue at the current pace of tightening for longer.
Technical Views
DXY
The Dollar Index is holding at 20-year highs into the end of the week. While price remains above the 104.02 level, the focus is on a continuation higher. However, worth noting the strong bearish divergence we’re seeing in momentum studies, flagging potential reversal risks near-term.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.