On July 20th, Cleveland Fed President Beth Hammack stated that, given resilient consumer spending and a persistently low unemployment rate, the ongoing high inflation is her primary concern at present. Hammack wrote in an article published on LinkedIn on Friday, "There is currently no conflict in the Fed's dual mandate. Inflation remains too high, while the labor market is roughly at what I consider to be full employment." Her latest remarks continue the hawkish signals recently sent by several Fed officials. Dallas Fed President Lorie Logan said on Thursday that inflation does not currently appear to be on a sustained path back to the Fed's 2% target, necessitating further interest rate increases. Hammack noted that she has recently heard widespread concerns about price pressures from business and community leaders, covering various aspects such as energy costs, supply chain disruptions, rising insurance premiums, and increased spending driven by the AI boom.
Additionally, in a report released on the 19th, Goldman Sachs chief economist Jan Hatzius pointed out that improvements in inflation have essentially locked in the outcome of the FOMC holding rates steady this month. However, the real test for Fed Chair Waller lies in how to effectively manage market expectations during a policy shift to prevent an overshoot in financial conditions. Goldman Sachs' Fed path forecast remains significantly below market pricing. Its base case scenario (35% probability) involves one rate cut each in June and December 2027, while the probability of a rate hike scenario is only 25%. The report also noted that Goldman's interest rate strategists believe the market is currently overpricing tightening, but as long as the risk of escalation in the Middle East continues to dominate market sentiment, this mispricing will be difficult to correct in the short term.
Data to watch today includes Germany's June PPI year-on-year, Canada's June unadjusted CPI year-on-year, and the US June Conference Board Leading Indicators month-on-month.
Gold / USD
Gold rose in volatile trading on Friday, closing slightly higher for the day. The pair is currently trading around 4008. In addition to some support from short-covering, the cooling expectations for a Fed rate hike in July were also a key factor supporting gold's rebound. However, concerns about inflation triggered by tensions in the Middle East limited the rebound's scope. Today, watch for resistance around 4050 and support around 3950.
AUD / USD
The Australian dollar fell in volatile trading on Friday, closing slightly lower for the day. The pair is currently trading around 0.6990. In addition to some pressure from profit-taking, lingering market risk aversion was also a significant factor weighing on the Aussie. However, the recent hawkish stance of the Reserve Bank of Australia and cooling expectations for Fed rate hikes limited the pair's downside. Today, watch for resistance around 0.7100 and support around 0.6900.
USD / CAD
The USD/CAD pair fell in volatile trading on Friday, hitting a new four-week low. The pair is currently trading around 1.4010. In addition to some pressure from cooling expectations for a Fed rate hike, a significant surge in crude oil prices supported by escalating tensions in the Middle East was also a major factor weighing on the pair. However, a rise in the US dollar index, supported by strong economic data and safe-haven demand, limited the pair's decline. Today, watch for resistance around 1.4100 and support around 1.3900.
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