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

FOMC member Susan Collins speaks and says:

• “Optimistic” inflation can decline with only a “modest” increase in unemployment, and considers an “expanded” path to this outcome.
• Current policymaking requires “considerable” patience to get the data signal right.
• Despite “encouraging” recent data, inflation remains too high.
• Key elements of inflation, such as basic non-housing services, have not demonstrated “sustainable” improvement.
• supports vigilance regarding inflation risks; believes it is “too early to be sure” that inflation is under control given the persistence of above-trend economic activity.
• Liquidity levels return to “pre-pandemic norms”; expects household and business spending to be further influenced by high interest rates.
• Some inflation figures are encouraging
• Economic activity continues to be above trend

This week, the Federal Reserve rates remained unchanged, but they also expect another hike by the end of the year. These comments are consistent with this idea. They also raise expectations for the rate at the end of 2024 from 4.6% to 5.1%. That still implies a 50 basis point cut if they actually raise rates in 2023.

In the United States, in this current market, rates have decreased slightly, with the decreases being the shortest and largest:

• 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
• Yield at 30 years 4.543%, -0.8 basis points

US stocks are positive:

• The Dow Jones industrial average is up 62 points or 0.18% at 34,131
• The S&P index is up 15 points or 0.34% at 4,345.11
• The NASDAQ index is up 71 points or 0.53% at 13,294.46

The US dollar is leaning further downward with:

• EURUSD is heading towards 100 with a moving average of 1.0671. The current price is trading at 1.0665, touching the highs from earlier in the day.
• GBPUSD is also up at 1.2280 (US session high just hit 1.2284). Price is testing the high of a swing zone between 1.22608 and 1.22823.
• USDJPY tests Monday morning’s low at 148.126. A high from Wednesday’s early European session high reached 148.16. Starting to trade further below this level could result in further downward corrective action. Today’s high price fell about 4 pips from yesterday’s high price at 148.45 (today’s high price reached 148.41. The 100 hour moving average of the ‘USDJPY is down at 147.869 and would need to be broken to further tilt technical buying to the downside in the near term at least. It would also need to break the 200 hour moving average of 147.638 to increase the bearish bias. Nonetheless, sellers are trying to play with the inability to surpass yesterday’s high price.
• AUDUSD and NZDUSD continue their upward trend. AUDUSD is up 0.64% (41 pips). The NZDUSD gained the most with a gain of 0.88% (up 51 pips).