Fed's Kaplan: Moderate overshoot on inflation probably means 2.25% or 2.5%

Eren Sengezer FXStreet

The US Federal Reserve's new framework means that they will have tolerance for a modest inflation overshoot, Dallas Federal Reserve Bank President Robert Kaplan said on Thursday. "Moderate overshoot on inflation probably means 2.25% or 2.5%," Kaplan further explained.

Additional takeaways

"New Fed framework is not a commitment on what the Fed will do."

"New framework suggests US economy may have the capacity to run a hotter labour market than in past."

"It's wise to go forward not assuming the future will look like the past."

"Markets must not rely on the Fed's emergency lending programs forever; they will sunset."

Market reaction

The US Dollar Index showed no reaction to these comments and was last seen gaining 0.2% on the day at 93.08.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

AUD/USD eyes 0.7000 as USD remains on the back foot amid softer bond yields

AUD/USD fills a modest bearish gap on Monday, approaching 0.7000 during the Asian session amid holiday-thinned liquidity. The US Dollar remains on the back foot as US bond yields pull back from multi-year highs, supporting the pair. However, the Fed's hawkish outlook and the US-Iran standoff should limit USD losses. Moreover, diminishing odds of another RBA rate hike in November might cap the Aussie.

USD/JPY remains confined in a familiar range around 158.00

USD/JPY extends its range-bound price action at the start of a new week, trading around 158.00 as bulls remain on high alert amid speculation that authorities would step in to prop up the Japanese Yen. Furthermore, softer US bond yields keep US Dollar bulls on the back foot and cap the currency pair. However, geopolitical uncertainties could limit losses for the safe-haven buck amid thin liquidity due to a holiday in Japan and the US.

Gold advances to over one-week top, above $4,200 on softer bond yields/USD

Gold moves above $4,200 on Monday, hitting an over one-week high during the Asian session as softer US bond yields keep US Dollar bulls on the defensive. However, the US-Iran standoff over the Strait of Hormuz, along with a hawkish Fed, could limit USD losses. This could cap non-yielding bullion as traders look to US inflation figures and Fed Chair Kevin Warsh's speech for a fresh impetus during the latter part of this week.

Week ahead: US CPI, France’s budget crisis and Q3 earnings to set the market tone

The US dollar held relatively strong this week, despite the disappointing US jobs report on October 2, which further decreased the probability of a back-to-back rate hike by the Fed at the upcoming gathering on October 28.

Middle East War updates: New attack launched on Saudi airport

Here’s a brief recap of the key developments in the Middle East war that occurred over the weekend, which are expected to have a significant impact on markets in the upcoming week. In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?