On January 15, Chicago Fed President Austan Goolsbee defended the Federal Reserve's independence in a recent interview, calling it a necessary condition for achieving low and stable price levels. Speaking on Wednesday local time, Goolsbee stated, "The Fed's independence is absolutely crucial for the long-term inflation rate in the United States. In any place without central bank independence, inflation makes a comeback." Goolsbee remarked, "We've been working hard to bring down the inflation rate over the past five years; it hasn't been easy. If you undermine or attack the Fed's independence, you only make this problem worse." Looking ahead, Goolsbee noted that the lower-than-expected rise in the US Consumer Price Index (CPI) for December was "a good thing." "One thing I'm watching is whether consumers will continue to be the main driver of economic growth; on the inflation front, we need to see signs that we are steadily putting this round of price spikes behind us."
Furthermore, Minneapolis Federal Reserve Bank President Neel Kashkari, speaking at a virtual town hall hosted by the Wisconsin Bankers Association on Wednesday, indicated that the US economy remains robust under high interest rates, with inflation receding but still significantly above the Fed's 2% target. Concurrently, the labor market is cooling but has not yet shown clear signs of stress. Kashkari said, "The resilience of the economy has been stronger than I expected." He pointed out that consumer spending remains stable, while investment related to artificial intelligence, including data centers and energy infrastructure, remains very strong. "This makes me start to think about just how tight monetary policy really is." As one of the voting members on the Federal Open Market Committee this year, Kashkari emphasized that until inflation is clearly on track back to target, the Fed must proceed cautiously to avoid cutting rates too early or too much. Although job growth is slowing and hiring is weakening, the scale of layoffs remains limited, with the unemployment rate hovering around 4.4%.
Data to be watched today include the UK November Monthly GDP, UK November Industrial Output Monthly Rate, UK November Goods Trade Balance, the US January Philadelphia Fed Manufacturing Index, the US November Import Price Index Monthly Rate, US Initial Jobless Claims for the week ending January 10, and Canada's November Manufacturing Sales Monthly Rate.
Gold/USD Gold edged higher yesterday, once again refreshing its historical peak. Besides lingering market risk aversion providing strong support for gold, the perceived weakening of the Federal Reserve's independence also continued to underpin the metal. During the Asian session early today, gold retreated from its highs due to profit-taking and a slight easing of geopolitical tensions that cooled risk-off sentiment. Spot gold is currently trading around $2040. Pressure around $2050 will be monitored today, with support near $2030.
USD/JPY USD/JPY moved lower in a choppy session yesterday, closing slightly down for the day. The pair is currently trading around 148.50. Apart from profit-taking exerting some downward pressure, the perceived weakening of the Fed's independence also weighed on the pair. Additionally, renewed fears of intervention by the Bank of Japan in the currency market were a significant factor pressuring the pair lower. Pressure around 149.50 will be watched today, with support near 147.50.
USD/CAD USD/CAD trended lower yesterday, closing with modest losses. The pair is currently trading around 1.3450. Besides technical selling pressure around the 1.3450 level, the perceived weakening of the Fed's independence also contributed to the pair's decline. Furthermore, rising crude oil prices exerted additional downward pressure. Pressure around 1.3550 will be monitored today, with support near 1.3350.
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