In a speech yesterday to a policy forum, Federal Reserve Chairman Powell addressed the Fed’s rate policy in light of recent economic data:
- ‘More recent data shows solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2% inflation goal.’
- ‘We can maintain the current level of restriction for as long as needed.’
- ‘The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence.’
The year-end implied overnight reached 4.923% following Powell’s comments compared to the current 5.329% implied rate, or only 0.406 basis points of expected cuts. In January the 2024 year-end implied rate was 3.65% so more than five 25-bps have now been priced out.
The dollar is lower today, its first drop after six consecutive daily gains following U.S. yields lower. The dollar index is -0.04% at 106.223 after reaching a 6-month high of 106.517 yesterday. Dollar declines vs. the G10 range from -0.53% vs. NZD to -0.03% vs. SEK. The dollar’s biggest decline against the majors is a 1.01% drop vs. the Mexican peso. The dollar had rallied 4.79% vs. the MXN over the previous six trading days to reach 17.0950, USDMXN’s best since Feb 29th.
U.S. Treasury yields are lower in the 2yr-30yr tenors, the mid-tenors leading the way lower, down 0.057bps. The 10-year yield is -0.053.
Gold is +0.20% at $2,387.56. A daily close above $2,382.51 will mark a new record. Gold has appreciated 15.78% YTD, outdone by silver’s 20.18% YTD gain.
Oil is -1.35% at $84.20/barrel but remains +17.49% YTD. Gasoline is -1.94% today, but up a hefty 31.64% YTD.
