Fed officials’ comments support dollar

25 August 2023 159
Fed officials’ comments support dollar

Global central bank officials have gathered in Jackson Hole for the annual two-day meeting of the Federal Reserve Bank of Kansas City.

Investors will analyze proceedings of the symposium to gain insight into the outlook for interest rates, which the Fed raised in July to a range of 5.25–5.5%, the highest level in 22 years.

The officials have a large amount of economic data to review before their next meeting on September 19-20, including the monthly employment report and the latest inflation data.

Economic forecasts released in June show that the average Fed official expects rate hikes at least one more time this year.

But investors expect the Fed to keep rates steady through the end of the year, according to futures contract prices.

Two Federal Reserve officials signaled that policymakers may be close to ending the cycle of interest rate hikes, but one refrained from ruling out further increases until inflation declines more clearly.

As Boston Fed President Susan Collins said on Thursday, there may be a need for additional increases. Rates are probably close to the point where they may consolidate for a long period of time.

On Thursday, Collins spoke with multiple media outlets, saying the U.S. economy has not yet slowed enough to put inflation on a sustainable trajectory downward, suggesting that the Fed may need to raise rates further. Collins also stated that she’s among the policymakers who anticipate another rate hike this year.

On the other hand, Philadelphia Fed President Patrick Harker repeated his view on Thursday that the Fed should keep interest rates at their current level.

Harker, a voting member on the policy-setting Federal Open Market Committee, said in an interview with CNBC that for now the central bank has probably done enough.

Former St. Louis Fed President James Bullard stated during an interview with Bloomberg Television on Thursday morning that resuming economic activity this summer could delay the Fed’s plans to end interest rate hikes.

Bullard believes the U.S. economic recovery could postpone the Fed's policy change.

The expressed opinions bring additional uncertainty in the prospects of the Fed's further monetary policy and support the U.S. dollar in the medium term.

Thus, EURUSD is likely to remain in the range of 1.07-1.085. These are the key support/resistance levels for EURUSD in the medium term.

The final recommendation is to sell EURUSD if the price rises to 1.085. The target is at 1.07. The Stop-loss is at 1.095.

This content is for informational purposes only and is not intended to be investing advice.

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