Fed’s Williams: Slowing down on rate rises makes sense right now

Anil Panchal FXStreet

Federal Reserve (Fed) Bank of New York President, as well as Vice Fed Chair, John Williams crossed wires via Reuters late Wednesday when he unveiled support for slowing down on the rate hike trajectory. The policymaker also showed his data dependency for future Fed decisions.

The voting member of the Federal Open Market Committee (FOMC) also unveiled his support for no rate change in June monetary policy meeting but marked surprise from the stable natural rate level.

It should be noted that the Fed Vice Chair Williams quoted remarkably “well-anchored” inflation expectations but cited that fate of inflation is up to the Fed.

Even so, Fed’s Williams marked the need for the US central bank to balance the demand and supply flow, indirectly suggesting higher rates ahead.

Key statements

I’m not content with where inflation is right now.

I see progress on inflation but price pressures still too high.

Economy still has strong demand for labor.

FX implications

Being the statements from one of the key Fed members, the markets reacted to the mostly hawkish comments by supporting the US Dollar, in hopes of higher rates from the US central bank. The same joins the upbeat FOMC Minutes to weigh on the EUR/USD, pressured at a weekly low of around 1.0850.

Also read: EUR/USD bears move closer to the edge of the abyss after FOMC minutes and ahead of a slew of key US data

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 revisits 1.3530; Dollar pushes harder

GBP/USD adds to the weekly correction and recedes toward the 1.3530 zone on Friday. Indeed, Cable faces increasing selling pressure on the back of extra gains in the Greenback, particularly fuelled by Chair Warsh’s speech at the Jackson Hole Symposium and the US NFP Annual Revision (-79K).

EUR/USD breaches below 1.1600, multi-day lows

EUR/USD now accelerates its decline and retreats to seven-day troughs in the sub-1.1600 region at the end of the week. The pair’s pullback comes on the back of the strong rebound in the US Dollar after Chair Warsh delivered a hawkish message in Jackson Hole, while the US NFP Annual Revision came in at -79K.

Gold seems vulnerable above $4,450 as Fed hike bets, Iran risks support USD

Gold recovers slightly from a one-and-a-half-week low, touched during the Asian session on Monday, though any meaningful recovery seems elusive. Fed Chair Kevin Warsh’s Jackson Hole speech was perceived as hawkish, raising expectations for a September rate hike. Adding to this, fresh US strikes on Iran keep the geopolitical risk premium in play, which acts as a tailwind for the safe-haven US Dollar and should cap the bullion.

Week ahead: RBNZ and BoC decide on rates ahead of all-important US NFP

The US dollar staged a modest recovery this week, perhaps as traders decided to cover some of their short positions amid slightly stickier or in-line US PCE inflation numbers for July, confounding expectations of softer prints amid the softness revealed in the CPI data for the month.

CFTC Report: CAD short covering leads; Gold buying surges

The week in one sentence: speculative positioning shifted more constructively in the week to August 25. CAD short covering led the move, followed by a broad reduction in EUR shorts and renewed Gold buying. GBP and VIX positioning also improved, while JPY positioning deteriorated and WTI flows diverged from weaker prices.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.