US data and Fed comms inconsistent with significant rate cutting cycle

Matthew Ryan, CFA Ebury

Macroeconomic and policy news was overshadowed by the tariff ruling on Friday, but it is worth noting that most of the data released last week supported the Fed hawks.

Durable goods orders, a raft of housing data and weekly jobless claims all came out stronger than expected. Furthermore, the minutes of the last Fed meeting were very hawkish and suggest that several FOMC members are close to considering hikes in the overnight rate.

However dovish incoming Chair Warsh tries to be, he will have a difficult time dragging the rest of the voting members along. Of course, the fresh tariff chaos takes front and centre for now, but neither data out of the US economy or Fed communications seems consistent with a significant rate-cutting cycle.

Friday’s sharp downward revision to the fourth quarter GDP estimate (to 1.4% annualised from the initial 4.4% estimate) is a clear break from this narrative, although investors have largely overlooked it given its datedness.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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