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RSM Chief Economist Joseph Brusueras: Warsh delivered the right hawkish signals at the press conference and attempted to reinforce the Fed’s credibility in restoring price stability, while also enhancing his own credibility.U.S. stocks continued to decline after the Walsh press conference, with the S&P 500 falling 1%, its biggest drop since July 29, the Dow Jones Industrial Average down 1.65%, and the Nasdaq Composite down 0.6%.On September 17th, Federal Reserve Chairman Warsh declined to answer questions at a press conference regarding his interactions with US President Trump. Trump has been calling for lower interest rates in recent months. Warsh stated, "I have no comment on my discussions with the president." White House Council of Economic Advisers Chairman Christopher Phelan said on Tuesday that raising interest rates would be a "mistake."On September 17th, Federal Reserve Chairman Warsh stated that he would not disclose details of future interest rate decisions by the Federal Open Market Committee (FOMC). He said, "I am not responsible for providing forward guidance. Our decision today (to raise interest rates) is a carefully considered, serious, and responsible one. We have been preparing for and thinking about this decision for the past 110 or 120 days." Warsh also stated that this decision was not market-driven. He said, "Our decision today is based on our assessment of the current situation, our judgment of the employment trend, and our assessment of the strength of the economy. Sometimes, the market tries to anticipate our decisions. I watch market prices to see what information the market is sending. But todays decision is our own."On September 17th, Warsh stated that while the Federal Reserve cannot prevent price shocks in commodities such as oil on its own, the central bank can use policy tools to prevent further spread of inflationary pressures. Warsh said, "We cannot influence the price of any single commodity, such as oil or groceries." However, he pointed out, "We can and will ensure that any changes in relative prices do not spread further, and do not have second- or third-order effects on the economy. Thats our responsibility, and thats what were doing." Warsh made these remarks as U.S. diesel prices hit a record high due to the Iran war.

On cautious optimism and with RBA/Fed discussion in the focus, AUD/USD holds higher than 0.6800

Daniel Rogers

Jul 18, 2022 11:54

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The AUD/USD currency pair is trading higher for a second day in a row as bulls approach the 0.6800 level. On Monday during the Asian session, it increased 0.20 percent intraday to 0.6810. In order to maintain buyer optimism ahead of a busy week, the Aussie pair takes cues from the lower US dollar and moderately upbeat market tone.

 

Despite this, traders lower their hawkish predictions for the upcoming Fed move, which causes the US Dollar Index (DXY) to extend Friday's losses to 107.75, a loss of 0.22 percent intraday. However, given the very dismal US statistics and contradictory Fed comments, recent dovish Fed bets seem to have been decreased.

 

US retail sales for June increased 1.0 percent month over month, exceeding expectations of 0.8 percent and prior estimates of -0.1 percent (updated from -0.3 percent). Meanwhile, the flash estimate for the July Consumer Confidence Index from the University of Michigan increased to 51.5 from 49.9 from expectations and 50.0 from prior data. The Consumer Expectations Index hit its lowest point since May 1980 at 47.3. While the New York Empire State Manufacturing Index increased from -2.0 and -1.2 to 11.1 in June, the US Industrial Production fell by 0.2 percent month over month.

 

The AUD/USD pair recovered in response to the mixed data as well as a Fedspeak revision away from earlier projections for a 75 basis point rate increase. Raphael Bostic, president of the Atlanta Fed, said on Friday that the 75 basis point rate increase in June was a "big shift" and that the Fed wants an orderly transition in policy. The Federal Reserve Bank of San Francisco's president, Mary Daly, said on Friday that the Fed's goal is to lower inflation without choking the economy. Furthermore, James Bullard, president of the St. Louis Federal Reserve Bank, seemed unconcerned when he told Reuters on Friday that a rate increase of either 100 basis points (bps) or 75 bps at the next meeting wouldn't make much of a difference.

 

Additionally, the European Central Bank's (ECB) hawkish forecasts, China's readiness for fresh stimulus, and the Fed's blackout period before to the FOMC meeting in late July all support the AUD/upside. USD's

 

Although US Treasury rates closed the week on a negative note, Wall Street ended the week on a good note. The 10-year US Treasury rates, according to the most recent data available, are down 1.1 basis points (bps) to 2.91 percent, although S&P 500 Futures remain firmer at 3,870.

 

Future AUD/USD traders may be interested in risk triggers despite a light domestic timetable. However, it will be important for pair traders to keep an eye on the Reserve Bank of Australia's (RBA) Minutes Statement and Guy Bullock's comments.


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