Dollar Pushes On
The US Dollar continued to push higher yesterday with the trade-weighted index hitting fresh highs for the year. Momentum was capped later into the session however by dovish comments from Fed’s Daly. The San Franscisco Fed president was heard voicing her support for further rate cuts noting that there was no information to suggest the Fed shouldn’t continue reducing its headline rate. Daly went on to say that rates were still very restrictive given the trajectory of inflation and urged the need to prevent a further decline in the labour market.
Data-Driven Fed
Commenting on the bank’s recent half-point reduction, Daly noted that it was a close-call to go with a deeper cut though she personally was strongly in favour of the move. Looking ahead, Daly refrained from offering comments regarding the expected pace and scale of cuts, saying that the Fed would adjust rates in line with developments in the economy. As such, traders will be closely monitoring incoming inflation and labour market data to gauge likely Fed action.
Shifting Fed Outlook
Daly’s comments come on the back of other policymakers who spoke on Monday, displaying a preference for a slower pace of cuts going forward. Both Fed’s Logan and Kashkari cited the need for a gradual lowering of policy. This outlook feels more in line with the view the market has taken recently, pairing back expectations of further .5% cuts, seeing USD recover higher accordingly. While this narrative holds, USD likely has room to recover further ahead of the November FOMC.
Technical Views
DXY
The rally in the DXY has seen price breaking back above the 102.46 level and the bull trend line. Price is currently stalled into a test of the 104.05 level. However, with momentum studies bullish, focus is on a continued push higher with 105.97 the higher bull target to note.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.