Fed’s Barkin: Would support rate cuts when there is conviction inflation is heading down

Anil Panchal FXStreet

“Fed is still a ‘good way away’ from the 2% inflation target,” said Thomas Barkin, President of the Federal Reserve Bank of Richmond.

Key statements

Will not prejudge July meeting.

The question of how much slack is needed to lower inflation is "the fundamental question" the Fed needs to dig into.

A lot of pandemic era forces still countering fed tightening, including excess savings, housing and asset wealth, fiscal spending.

Does seem that demand is weakening.

Market reaction

The news fails to inspire the US Dollar bulls amid broad hawkish concerns versus the latest dovish remarks from the Fed policymakers. Even so, the US Dollar Index (DXY) defends the previous day’s bounces off a six-week low, around 102.40 by the press time.

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

GBP/USD holds above 1.3350 with the 200-day SMA capping gains

The British Pound appreciates against the US Dollar on Tuesday to trim previous losses and return to the 1.3375 area, aiming to retest resistance at the key 200-day Simple Moving Average. This is a popular indicator, which lies a few pips below 1.3400 and has been capping Pound’s recovery over the last two weeks.

EUR/USD consolidates gains above 1.1400

Following an earlier move to multi-day peaks past 1.1460, EUR/USD has now slipped back toward the low 1.1400s as the NA session draws to a close on Tuesday. Declining bets for potential Fed tightening later in the year coupled with poor US CPI data hurt the US Dollar, lending fresh legs to the pair and the broader risk-linked universe. Moving forward, the release of US PPI and Chair Warsh’s second testumony should keep investors entertained on Wednesday.

Gold battles to recover the $4,100 mark

Gold reverses the recent weakness and reclaims the area beyond the key $4,000 mark per troy ounce on Tuesday. The precious metal’s recovery picks up pace and approaches the $4,100 region following the Greenback’s decline and comments from the Fed’s Warsh.

Bitcoin, crypto market post gains following weaker US inflation reading

The crypto market posted gains on Tuesday following the release of the US Consumer Price Index (CPI) report for June, which showed that inflation cooled below market expectations. According to the US Bureau of Labor Statistics, annual inflation slowed to 3.5% in June from 4.2% in May, marking its first decline in five months and coming in below the consensus forecast of 3.8%.

Fed Chair Warsh reaffirms they will deliver price stability

While testifying on the Semiannual Monetary Policy Report before the US House Financial Services Committee, Fed Chairman Kevin Warsh reiterated that the Fed is making a commitment on price stability and the goal of 2% inflation.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.