The FX market is relatively calm and being gently bounced around by headlines out of Iran.
One-month G7 FX implied volatility is near the lows of the year, suggesting the FX market is not priced for any dramatic news trends.
He is a non-voter this year, but is not typically seen as one of the most hawkish on the Fed.
For a better steer on Fed thinking from another centrist, we have a speech from Christopher Waller today at 4:00pm CET.
Expect DXY to remain supported in a 99.00-99.50 range, with upside risks should Waller hint at the need for rate hikes.
The FX market is relatively calm and being gently bounced around by headlines out of Iran. One-month G7 FX implied volatility is near the lows of the year, suggesting the FX market is not priced for any dramatic news trends. The story since mid-May, however, has been the hawkish re-pricing of the Fed cycle and a stronger dollar. The market now prices 20bp of Fed hikes by December.
The Chicago Fed President, Austan Goolsbee, sounded a word of warning yesterday by announcing, "We have a pretty significant inflation problem developing". He is a non-voter this year, but is not typically seen as one of the most hawkish on the Fed. For a better steer on Fed thinking from another centrist, we have a speech from Christopher Waller today at 4:00pm CET. He typically delivers very clear speeches on the economic outlook, and his most recent speech made the case for a prolonged pause after he had voted for a rate cut in January. It is probably too early for him to be speculating over a hike, but this speech could be the biggest market mover on a quiet Friday. The background here is that, now that the US jobs market looks relatively stable, the Fed should be concentrating more on its price mandate.
Today's US data calendar is quite light. Final releases for the University of Michigan Consumer sentiment today will provide an update on inflation expectations at both the one-year and five-to-ten year horizons. Any increase in the medium-term expectations will be important for the Fed.
Expect DXY to remain supported in a 99.00-99.50 range, with upside risks should Waller hint at the need for rate hikes.
Chris Turner
