Fed's Barr: Iran oil price shock could shift inflation expectations and delay rate cuts

Haresh Menghani FXStreet

Federal Reserve (Fed) Governor Michael Barr said on Thursday that the economy has remained resilient through a series of shocks, but those have complicated the central bank reaching its 2% inflation goal.

Additional Quotes:

If the Middle East conflict ends soon, its economic impact could be limited, but there could be broad implications for the economy otherwise.
Concerned that another price shock could shift inflation expectations, leading to more inflation persistence.
Makes sense for the Fed to take some time and assess economic development before further policy changes.
Recent regulatory changes and cuts to staff are eroding trust in the stability of the financial system, making banks less resilient.
Job and labor force growth appear to be in balance, but a low level of hiring leaves the labor market vulnerable to shocks.
The longer inflation remains above 2%, the greater the risk that it becomes entrenched.

Market Reaction:

The comments remain supportive of the bid tone surrounding the US Dollar (USD), which continues to be underpinned by persistent geopolitical uncertainties stemming from the Middle East conflict.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

AUD/USD hangs near three-week low, below 0.6950 as traders await US NFP report

AUD/USD hits a three-week low during the Asian session on Friday as the RBA’s dovish shift and a rout in equity markets weigh on the risk-sensitive Aussie. However, the recent slump in US bond yields to a two-month low keeps US Dollar bulls on the back foot and limits losses for the currency pair as traders look to the US NFP report for a fresh impetus.

USD/JPY bounces off three-week low; keeps the red near 157.65 as focus remains on US NFP

USD/JPY bounces off the weekly low set during the Asian session, as bears turn cautious ahead of the US NFP report due later this Friday. The upside seems limited as the recent slump in US bond yields and hopes of Iran war de-escalation undermine the US Dollar. Moreover, a hawkish BoJ and intervention risks support the Japanese Yen, capping the pair.

Gold retakes $4,100 as weak US bond yields and USD support ahead of US NFP

Gold attracts dip-buyers during the Asian session on Friday, stalling the previous day’s pullback from a two-week high. The recent fall in US bond yields undermines the US Dollar amid hopes for Iran diplomacy, supporting the bullion. However, a higher-rate environment warrants caution for XAU/USD bulls as focus remains on the crucial US NFP report.

Ethereum falls 7% as AI sell-off hits crypto

Ethereum falls 7% to $2,230 on Thursday as AI stock sell-offs spilled into the crypto market. The top altcoin's decline wiped out all of Wednesday's post-US midterm gains, triggering $181.8 million in ETH liquidations over the past 24 hours. Long liquidations dominated, totaling $149.7 million, according to Coinglass data.

Neither the election nor the US Dollar: Why Friday's payrolls hold the key to Gold's next move

Gold has climbed back above $4,000 as the US Dollar weakened following a Democratic sweep in the US midterm elections. However, with every Gold rally facing heavy selling throughout the year, investors are looking to Friday's Nonfarm Payrolls report to determine whether this move marks a sustainable breakout or just another temporary rebound.

US Dollar breaks below 101.50 as Democrats sweep Congress

The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.