Fed Collins: Despite encouraging recent data, inflation remains too high

FOMC member Susan Collins is speaking and says:

• “Optimistic” inflation can fall with only a “modest” rise in unemployment, sees a “widened” pathway to that outcome.
• Current policymaking requires “considerable” patience to get the right signal from data.
• Despite “encouraging” recent data, inflation remains too high.
• Key elements of inflation, such as core services excluding shelter, haven’t demonstrated “sustained” improvement.
• Supports vigilance regarding inflation risks; believes it’s “too soon to be confident” that inflation is under control given the continued above-trend economic activity.
• Cash levels are reverting to “pre-pandemic norms”; anticipates household and business spending to be more influenced by high interest rates.
• Some inflation readings have been encouraging
• Economic activity continues to be above trend

This week the Federal Reserve Rates unchanged, but they also still see one more hike between now and the end of the year. These comments are consistent with that idea. They also raise the expectations for the end of 2024 rate from 4.6% to 5.1%. That still implies a decline of 50 basis points if they indeed to raise rates in 2023.

In the US at that market today, the rates have come off a bit with the shorter and leading the declines:

• 2-year yield 5.101%, -4.5 basis points
• 5-year yield 4.569%, -4.7 basis points
• 10-year yield 4.453% -2.6 basis points
• 30-year yield 4.543%, -0.8 basis points

US stocks are positive:

• Dow industrial average is up 62 points or 0.18% at 34131
• S&P index is up 15 points or 0.34% at 4345.11
• NASDAQ index is up 71 points or 0.53% at 13294.46

The US dollar is tilting more to the downside with the:

• EURUSD moving toward its 100 are moving average of 1.0671. The current price is trading at 1.0665 skimming the highs from earlier today.
• GBPUSD is also moving higher trading at 1.2280 (the US session high just reached 1.2284) . The price is testing the high of a swing area between 1.22608 and 1.22823.
• USDJPY is testing the Monday morning low at 148.126. A swing high from Wednesday’s early European session high reached 148.16. Start to trade more below that level could see further corrective moves to the downside. The high price today fell about 4 pips short of the high price from yesterday at 148.45 (the high price today reached 148.41. The USDJPYs 100 hour moving averages down at 147.869 and would have to be broken to tilt the technical buys more to the downside in the short term at least. The 200 hour moving average 147.638 would also need to be broken to increase the bearish bias. Nevertheless sellers are trying to make a play with the inability to get above the high price from yesterday.
• The AUDUSD and the NZDUSD are continuing their trend to the upside. The AUDUSD is up 0.64% (41 pips). The NZDUSD is the biggest mover with a gain of 0.88% (up 51 pips).