USD breakout failed at 113.92 on Friday, same spot that held when CPI was released. Despite supportive backdrop for stronger USD (and weaker stocks), these seems to be getting priced-out, suggesting a pullback. Key for EUR/USD is the ECB on Thursday.
), warning markets of a 75 bp hike a couple of days before the rate decision. Given that the Fed was in a blackout and by rule, was supposed to refrain from issuing market commentary, this report was extremely interesting.
And it’s perhaps no coincidence that when the actual rate hike was announced, markets didn’t freak out. The S&P actually gained on thatrate decision – and then bottomed a couple of days later before rallying for the next two months. The more recent report, issued on Friday, did not say that there was a pivot incoming. It did, however, begin to soften what’s been a harsh tone from the Fed, illustrating that the next rate decision is when the bank will discuss how to begin slowing rate hikes. And while this isn’t evidence of a pivot is a change that may remove some pressure from the matter.
That report hit around the same time some comments from Mary Daly of the San Francisco Fed began to make their way around. She’s been one of the more notable Fed-speakers, in my opinion, as she helped to bring rates back to life in early-August when reminding markets that, despite the June FOMC rate decision, the Fed was nowhere near done with rate hikes.
Her remarks on Friday were notably softer than her prior comments, instead focusing on the risk of over-tightening. And when those comments hit the wires after the earlier report from the Wall Street Journal, the risk trade was ready for some run as both USD dropped and stocks ran-higher. This was also around the time of BoJ intervention, so there was quite a bit going on just ahead of the Fed’s entrance into the blackout window ahead of the November FOMC.
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