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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.

The USD/CHF exchange rate declines toward 0.9400 as FOMC-inspired confidence boosts market mood

Alina Haynes

Nov 24, 2022 15:00

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In the early Asian session, the USD/CHF pair is wallowing at 0.9423 after two consecutive severely bearish sessions. Bears have paused their six-day run in the last two trading sessions as investors' risk appetite has increased. In response to Federal Open Market Committee (FOMC) minutes containing fewer hawkish indications, the dollar fell.

 

As market sentiment remains hopeful, it is projected that the major currency will continue to drop and may approach the 0.94 round-number support level. The FOMC minutes signal that the era of greater rate hike announcements is over and that a reduction in the rate rise pace is necessary for central banks to attain price stability.

 

Due to Federal Reserve (Fed) policymakers' less hawkish statements on interest rate guidance, the US Dollar Index has dropped (DXY). The US Dollar is now trading near 106.10, and it is expected to test the previous week's low of 105.34. As the likelihood of a fifth consecutive rate hike of 75 basis points (bps) by the Fed diminishes, so do the returns on US Treasury bonds. Long-term US Treasury bond yields have dropped below 3.80%. Meanwhile, US markets are closed on Thanksgiving.

 

Additionally, solid US Durable Goods Orders were insufficient to support the US Dollar. The economic data exceeded expectations and the preceding report by 1.0%. Strong consumer demand and low real income may encourage customers to borrow more, resulting in higher delinquency costs for credit providers.

 

Regarding the Swiss franc, Swiss National Bank (SNB) Chairman Thomas J. Jordan reiterated that monetary policy remains expansionary and "we will likely change monetary policy again" The Swiss central bank is mandated to maintain an inflation rate between 0 and 2 percent, and the existing monetary policy is sufficient to achieve this goal.

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