USD Remains Soft With the 100 bps FED Hike Off the Table

The USD has retreated, sending EUR/USD 300 pips off last week's low, as odds of a 100 bps FED rate hike dwindle

Housing starting to suffer in Australia as RBA hikes make mortgages more expensive

Markets were trying to guess whether the FED would raise interest rates by 0.50% or 0.75% in this meeting until late last week, when the Bank of Canada (BOC) delivered a 100 bps (basis points) rate hike, opening the door of other central banks to do so if they thought this is appropriate. Then the odds of a 100 bps rate hike by the FED increased and markets then started trading the 75-100 bps decision.

CPI inflation jumped to 9.3% in June as the report last week showed, while PPI (producer price index) increased above 10% the next day, which means that CPI will keep increasing in the coming months. Retail sales also came stronger in Friday, but not that strong as to push the FED toward a rate hike. Some FED members pointed to the housing reports this week, as the last decent data release before next week’s FOMC rate decision. Today’s report was slightly positive but again, nothing to justify a 100 bps or 1.00% rate hike by the FED.

US June 2022 Housing Starts and Building Permits

  • June housing starts 1.559m vs 1.580m expected
  • May housing starts were 1.549m (revised to 1.591m)
  • Permits for June 1.685m vs 1.650m expected
  • Prior permits were 1.695m

The Fed’s Waller highlighted retail sales and this week’s housing data as potential reasons to shift to 100 bps if they were ‘materially’ stronger than expected. The headline here is weaker but it’s balanced by the revisions to the prior and the beat on permits. In any case, this certainly isn’t materially stronger and should put another nail in the coffin of the 100 bps debate. The USD has turned bearish since Friday on these premisses.

EUR/USD Live Chart

EUR/USD
ABOUT THE AUTHOR See More
Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

Related Articles

Federal Reserve Chair Jerome Powell has sounded the alarm on a potential trade standstill reminiscent of the pandemic era — a scenario...
1 week ago

Comments

0 0 votes
Article Rating
Subscribe
Notify of
0 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments

HFM

Doo Prime

XM

Best Forex Brokers