Despite yesterday's hawkish comments by Christopher Waller, head of the St.Louis Fed, and Neel Kashkari of the Minneapolis Fed, and Joe Biden indicating that a recession in the U.S. this year or next, and that relations with China after the balloon incident have not suffered - the market is selling off the U.S. currency today. Recent statements by members of the Federal Reserve can be interpreted as an effort to dilute the somewhat dovish tone of Powell's recent conference and an attempt to make markets understand that interest rates can continue to rise because the fight against inflation is far from won.
Fed Waller
- To further slow economic activity in 2023, the Fed will have to maintain a tough policy stance for some time;
- Inflation remains quite high, more needs to be done. Interest rates may stay higher for longer than some currently expect;
- The US economy is adjusting well to higher interest rates. The work on inflation is not finished, it could be a long struggle;
- I don't see signs of a rapid decline in inflation and am preparing for a longer fight. I expect the economy to continue to grow at a moderate pace this year;
- I need to see a continuation of moderate inflation before my perspective changes. Excessive inflation is a more serious problem than higher interest rates;
- Continued inflationary pressures are due in part to a very tight labor market;
- There has been some moderation in wage growth, but not enough;
- The recent trend of falling inflation is positive but we need to be sure that inflation will continue to fall.
Fed Kashkari
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Create account Try a demo Download mobile app Download mobile app- We will keep rates high for a long time before we decide whether rates will go up or down;
- Most of my Fed colleagues believe that rates will rise above 5%. And it is certainly possible that they will rise even higher;
- The financial markets are more optimistic than we are that inflation will fall quickly;
- We don't want to trigger a recession, but we know we have work to do on inflation;
- Wage growth is currently too high to support 2% inflation, we need to target wage growth around 3%;
- The service sector in the economy continues to flourish. There is little evidence that rate hikes have had a significant impact on the labor market so far;
- We will need to do more, but by how much more is unknown.
USDIDX settled below the 100 and 200 session moving averages signaling a supply advantage. The RSI fell around 30 points approaching oversold levels. The key to maintaining the uptrend will be to maintain the level near 103 points, which is marked by previous price reactions.
USDIDX chart, M15 interval. Source: xStation5
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