The USD has been showing some resilience in the first few weeks of 2024, however, it has been in a steep downtrend since October last year, so the overall trend remains bearish. Today the USD was pushing higher during the European session, but it stopped after a dive in Empire State FED Manufacturing, although it is resuming the upside movement again after comments from FED member Christopher Waller.

He was the one. In November, he boosted Fed rate-cut hopes by stating that he is heartened by what the FED has recently learned—something appears to be weakening, and it is the economy. He also stated that there are strong grounds that if inflation continues to decline for the next few months, interest rates might be lowered.

He has also established himself as a key message carrier ahead of the FOMC meetings, so today’s comments before Friday’s FED blackout are not coincidental. That’s a good opportunity to give markets a push which he did, today, while giving leeway for a course correction if the FED overreacts. The USD jumped 40 pips across the board since markets are now rethinking the path of rate cuts this year. We just booked profit in USD/JPY, while opening a sell GOLD signal.

FED Member Christopher Waller’s Comments

1. Carefully Calibrated Changes in Policy:
   • Emphasis on the need for changes in the policy path to be “carefully calibrated” and “not rushed,” suggesting a cautious approach to adjustments.
2. Confidence in Achieving Sustainable 2% Inflation:
   • Expressing confidence that the goal of achieving sustainable 2% inflation is within reach.
3. Need for More Information:
   • While expressing confidence, there is a need for more information in the coming months to confirm the assessment.
4. Balanced Risks to Fed’s Mandates:
   • Viewing risks to the Federal Reserve’s mandates as more closely balanced, indicating a nuanced assessment of potential economic challenges.
5. Potential for Rate Cuts in 2024:
   • Indicating the possibility of rate cuts in the current year, contingent on inflation not rebounding or staying high.
6. Caution in Policy Setting:
   • Stressing the importance of caution in setting policy to avoid over-tightening.
7. Moderation in Economic Activity:
   • Acknowledging that economic activity has moderated, suggesting a potential slowdown.
8. Restrictive Financial Conditions:
   • Noting that financial conditions remain restrictive, which may influence monetary policy decisions.
9. Labor Market Dynamics:
   • Highlighting signs that the labor market is coming into better balance, but also noting ongoing moderation in labor demand based on data on job openings.
10. Dependence on Data for Policy Decisions:
    • Emphasizing that the timing and actual number of rate cuts will depend on economic data.

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