The interpretation of Fed governor Waller's comments may be excessive

Stephen Innes SPI Asset Management

The problem is that no matter how rational expectations for rate cuts in 2024 might be (or at least might sound), those expectations can feed irrational overshoots in asset prices. The point, in fact, is today's bullion move that someone may have felt compelled to run the Gold stack at the COMEX open, triggering a cascade of stops, but they were quickly given a reality check when the market turned offered without a bid.

The interpretation of Fed governor Chris Waller's comments by the markets may be excessive. The Federal Reserve is expected to make considerations related to inflation risk management, limiting the aggressiveness of its easing actions. Put another way, too many rate cuts are priced in without the corresponding proof in the economic data pudding.

After all, It could substantially ease financial conditions if the Fed were to ease according to the current market pricing solely due to inflation normalization without clear signals of a recession. This might elevate the risk of an economic reacceleration, a scenario the Fed might view as unwelcome, particularly if it leads to inflationary pressures.

Hence, the primary market debate revolves around whether the FOMC would adjust policy beyond insurance cuts if growth slows and inflation moves closer to the target for a sustained period.

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

EUR/USD flirts with daily highs, retargets 1.1900

EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.

GBP/USD remains well bid around 1.3650

GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.

Gold clings to gains just above $5,000/oz

Gold is reclaiming part of the ground lost on Wednesday’s marked decline, as bargain-hunters keep piling up and lifting prices past the key $5,000 per troy ounce. The precious metal’s move higher is also underpinned by the slight pullback in the US Dollar and declining US Treasury yields across the curve.

Crypto Today: Bitcoin, Ethereum, XRP in choppy price action, weighed down by falling institutional interest

Bitcoin's upside remains largely constrained amid weak technicals and declining institutional interest. Ethereum trades sideways above $1,900 support with the upside capped below $2,000 amid ETF outflows.

Week ahead – Data blitz, Fed Minutes and RBNZ decision in the spotlight

US GDP and PCE inflation are main highlights, plus the Fed minutes. UK and Japan have busy calendars too with focus on CPI. Flash PMIs for February will also be doing the rounds. RBNZ meets, is unlikely to follow RBA’s hawkish path.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.