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USD Closes Another Steady Day on FED’s Balanced Comments

The USD tumbled 150 pips lower last week, but this week it is stabilizing, with other major currencies having no reason to gain. The FED continues to be uncertain about the starting date of monetary policy easing, with FOMC members supporting the higher-rates-for-longer.

USD/CHF Chart H1 – MAs Are Turning Into Support

Today we had a couple of FOMC members speaking, with Collins indicating a more hawkish stance by suggesting the Fed will maintain higher interest rates for an extended period, while Kashkari is more cautious and uncertain. Kashkari seems to straddle the line, neither firmly believing in rate hikes nor ruling them out completely, reflecting a pragmatic approach.

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His uncertainty extends to the Fed’s policy regarding cutbacks in 2024, leaving the door open for various possibilities. This uncertainty in the Fed’s stance may contribute to bullish momentum in the USD as investors try to gauge future policy decisions. SO, we decided to open a sell USD/CHF signal a while ago, while earlier today we sold NZD/USD .

Minneapolis Fed President Kashkari’s remarks provide further insight into his nuanced outlook on monetary policyIMG_9936 copy | Treasury czar Neel Kashkari speaks to the Se… | Flickr

  • His baseline expectation is for the Fed to maintain the current interest rate levels.
  • However, he acknowledges the possibility of rate cuts if disinflationary pressures resurface, while also being open to hiking rates if necessary.
  • Kashkari emphasizes that rate hikes are not the most likely outcome but cannot be completely ruled out.
  • He notes that recent economic indicators, such as the jobs report, have been somewhat mixed but not alarming.
  • Concerns arise regarding an uptick in new rent rates, indicating vigilance toward inflationary signals.
  • Kashkari suggests that the Fed will rely on multiple inflation reports to make informed decisions on rate cuts.
  • His stance on rate cuts in March was two, but he is reconsidering and may adjust to one or none.
  • Political considerations, such as the November election, will not influence Fed decisions.
  • Data-driven decision-making will guide the Fed’s approach to interest rates.
  • The Fed remains committed to achieving its 2% inflation target.
  • Overall, Kashkari views the economy as being in a stable position, albeit with the possibility of a sideways trajectory for the near future.
  • He emphasizes the importance of patience and suggests that the threshold for raising rates is high but not infinite.
  • Kashkari believes it is more probable for the Fed to maintain rates for a longer period than to raise them.
  • He expresses some skepticism about the immediate impact of monetary policy on the economy, suggesting that it may take longer to manifest.
  • The exuberance in financial markets, he implies, may not always align with underlying economic fundamentals.
  • Kashkari questions whether there may be a misinterpretation of the neutral rate.
  • Finally, he highlights the need for the Fed to articulate how it prioritizes between its inflation and employment objectives.

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USD/CHF
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Skerdian Meta
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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.
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