Yesterday a pair of Fed officials pushed back on rising market expectations of near-term rate cuts. Fed Governor Bowman reiterated the Fed’s view that it’s not yet appropriate to begin rate cuts as inflation is expected to remain elevated for some time. Recent data has shown inflation easing, leading to increased speculation of rate cuts this year. But until the data demonstrates ‘sustainable’ inflation near the 2% target, the Fed is not inclined to act. Bowman also indicated a willingness to raise the target range if progress on inflation reverses.
Fed Governor Cook struck a similar chord by indicating she sees little change to inflation for the remainder of the year, a not-so-subtle hint on the Fed’s outlook on rates.
The Fed comments helped lift the dollar. The U.S. Dollar Index is +0.37% at 105.996 after trading as high as 106.13 earlier in the day. The dollar is universally higher against the majors, primary gains: +0.93% vs. BRL, +0.69% vs. MXN & NOK, +0.68% vs. SEK, +0.57% vs. NZD, +0.50% vs. JPY, and several sub-0.50% gains.
USD/JPY traded at 160.62 today, nearly a 40-year high. Japan’s minister Kanda indicated the BoJ was watching rates ‘with a high level of urgency’ which strengthened the JPY back to 160.00. But dollar bulls used the dip to add to long USD/JPY positions, lifting the pair to 160.59.
U.S. New Home Sales for May were 619k, below April’s 698k, an 11.3% decline MoM.
