Strong dollar overlooks a likely pause

2023-09-08
Summary:

Senior Fed officials signaled on Thursday that the central bank will maintain interest rates in September, despite ongoing inflation concerns.

Senior Federal Reserve officials signalled on Thursday that the central bank would hold interest rates steady at its meeting in September even inflation fight is not over yet.


Dallas Fed president and FOMC voting member Lorie Logan is the latest of a few officials to voice support for a pause as their efforts ‘will require a carefully calibrated approach’.


She is seen as one of the Fed’s most hawkish officials, so her remark reinforces expectations that the Fed will likely stand pat later this month.


Christopher Waller, another hawkish Fed governor, also said this week that US economy defied any ‘imminent’ tightening by the Fed. Despite that, the dollar was headed for its longest weekly winning streak in nine years on Friday.


The dollar's risk could remain skewed to the upside by year-end due to rising Treasury yields and economic resilience but was expected to have weakened modestly in a year, according to a Reuters poll.


The euro was forecast to trade 1.7% higher at 1.09 against the dollar in three months and the yen to change hands at 132 in the next 12 months. A top forecaster for the yen, Masato Kanda, predicted its dip below 150 in 2024.

EURUSD

The euro broke below 200-day MA with conviction last week. Immediate support at 1.0635 holds though any meaningful appreciating move still seems elusive.


Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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