2023-08-25 17:59:00
The Eurodollar is trading near a 0.7% decline today and testing a rising trend line following Powell’s hawkish speech at Jackson Hole. Today’s data from the University of Michigan was disappointing, and shortly following Powell’s speech, the Fed’s Patrick Harker spoke on the economy.
Fed Harker :
I have my doubts that rate cuts will be considered before next year even if the labor market cools.
It will take time to reach the inflation target.
The Fed can hold interest rates steady at higher levels and see how that affects the economy.
If the decline in inflation stalls, we can call for more rate hikes.
The Fed has taken a restrictive stance and needs to exert pressure although according to Harker there is currently no need for further rate hikes.
University of Michigan sentiment and inflation expectations turned negative for Wall Street (consumers weakened) and ‘positive’ for the dollar (inflation expectations rose):
Consumer sentiment according to the University of Michigan: 69.5 vs. 71.2 previously and 71.2 forecast. Expected conditions: 65.5 once morest 67.3 previously. Current conditions: 75.7 versus 77.4 previously. Short-term inflation expectations (1 year) in the United States: 3.5% once morest 3.3% expected and 3.3% previously. Long-term inflation expectations (5 years) in the United States: 3% once morest 2.9% expected and 2.9% previously.
L’EURUSD tests the fall/winter 2022 uptrend line. If the bulls fail to hold 1.077, supply might start to prevail, indicating a possible medium-term trend change in favor of the dollar. EURUSD defended the 1.075 level where we see the 61.8% Fibonacci retracement of the December 2022 upsurge. Given the defense of this key area, the risk premium might, at least in the short term, favor the bulls on the eurodollar.
Source : xStation5
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