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Federal Reserve Chairman Jerome Powell will hold a monetary policy press conference in ten minutes.On March 19th, amid widespread market expectations of interest rate cuts by the Federal Reserve this year and next, one Fed policymaker predicted a rate hike next year. This prediction represents a minority view: most Fed policymakers still believe in rate cuts this year, consistent with their view in December. However, with the Iran war and its resulting surge in oil prices continuing into its third week, the sole prediction of a rate hike next year suggests a potential debate about whether its possible to combat inflation that has exceeded target levels over the past five years without changing interest rates. Furthermore, there are increasing signs that the Fed is trending towards a more hawkish policy stance. Even the most dovish policymaker (Milan) expects a 100 basis point rate cut this year, compared to his December forecast of 150 basis points. For this year, 7 of the Feds 19 policymakers believe interest rates will remain unchanged by the end of the year, 7 believe a 0.25 percentage point rate cut is needed, and 5 believe at least two rate cuts are necessary.The charts in the Federal Reserves economic projections show that most FOMC participants believe that PCE inflation and core PCE inflation face high uncertainty, with risks tilted to the upside.The chart in the Federal Reserves economic projections shows that most FOMC participants believe there is high uncertainty surrounding the unemployment rate and that the risks are tilted to the upside.March 19th - The Federal Reserves March monetary policy statement was largely unchanged from its January statement. The statement now notes that the unemployment rate is "virtually unchanged," whereas in January the Fed stated that the unemployment rate "had shown some signs of stabilization." The Fed statement added a new sentence: acknowledging the situation in the Middle East conflict, but stating only that its impact on the economy is "uncertain."

AUD/USD falls approaching 0.7200 despite the former RBA governor's aggressive forecasts

Alina Haynes

Jun 08, 2022 11:59

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Bears and buyers continue to fight for position around 0.7220-25 as sentiment is mixed and investors remain cautious ahead of the week's big data/events. In doing so, the Australian duo struggles to defend the hawkish remarks of former Reserve Bank of Australia (RBA) Governor Ian Macfarlane.

 

Ex-RBA Governor Macfarlane warned early Wednesday morning about chronically rising inflation and the need to drastically increase interest rates. The former policymaker also stated, "There is sufficient scarcity in Australia and the United States to maintain a high inflation rate."

 

In contrast, China's Vice Commerce Minister Wang Shouwen joined China's Vice Finance Minister Zou Jiayi in reiterating concerns about a global economic downturn and a decline in demand. Recent consensus among policymakers held that the rise of global demand is slowing.

 

It's worth noting that a rebound in US Treasury rates and apprehension ahead of Thursday's European Central Bank (ECB) meeting, as well as Friday's US Consumer Price Index (CPI) for May, tend to stifle the AUD/USD pair's movements.

 

In spite of this, 10-year US Treasury note rates jump two basis points (bps) to 2.99 percent the day after breaking a six-day downward trend. A record decline in the US trade deficit and optimism on the US budget appear to have prompted a recall of US Treasury bond sellers. The US trade deficit for April decreased 19.1 percent from the previous day to USD87.1 billion.

 

Other market optimists were defended by US Treasury Secretary Janet Yellen and optimism for a quicker economic rebound in China. Tuesday, US Treasury Secretary Yellen spoke before the Senate Finance Committee about the Fiscal Year 2023 Budget while stating that the US economy faced problems from "unsustainable levels of inflation" and supply chain disruptions. The official said, "An adequate budget is necessary to support the Fed's efforts to control inflation without damaging the labor market."

 

It should be noted that World Bank (WB) President David Malpass's warning that faster-than-anticipated tightening might force certain nations into a debt crisis akin to that of the 1980s appears to have impacted on the quotation as of late. The risk-negative news from Ukraine may follow a similar trajectory. Politico reported that Ukraine has not yet achieved a deal with Russia or Turkey to enable the safe passage of its grain ships in the Black Sea, casting doubt on a U.N. initiative to build a crucial food corridor.

Technical Evaluation

A two-week-old support line protects AUD/USD buyers at 0.7205. However, the 200-day moving average and the recent top, located around 0.7255 and 0.7285, may challenge the Aussie pair's upside before the bulls regain control.


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