Powell speech: A strong majority of Fed policymakers expect two or more rate hikes by year end

Dhwani Mehta FXStreet

US Federal Reserve (Fed) President Jerome Powell is speaking at the Fourth Conference on Financial Stability hosted by the Bank of Spain, in Madrid, on Thursday.

Key quotes

A strong majority of fed policymakers expect two or more rate hikes by year end.

Repeats labor market 'very tight,' inflation 'well above' goal.

Some indicators in the housing market have turned up; housing sector activity still far below its peak

US core pce inflation likely rose 4.7% in May from year earlier; overall pce index estimated to have risen 3.9%.

Will take time for full effects of monetary restraint to be realized, especially on inflation.

Process of getting to 2% inflation 'has a long way to go'.

Bank stresses that emerged in march 'may well lead' to a further tightening in credit conditions.

Extent of effects from tighter credit conditions remains uncertain.

Economy faces headwinds from tighter credit conditions.

Cannot take resilience of financial system for granted.

US banking system strains have eased, deposit flows have stabilized.

I look forward to evaluating proposals for changes to supervision, regulation of banks of the size of svb, and implementing them where appropriate.

We are still monitoring the situation very carefully in the banking sector.

There is a valuation adjustment going on in commercial real estate in the US.

We still have some funding vulnerabilities.

Most banks manage interest rates risk successfully.

Expect moderate pace of interest rate decisions to continue.

Market reaction

At the time of writing, the US Dollar Index is holding the renewed upside near 103.15, up 0.26% on the day.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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.