The Fed tried to deliver on its commitment to keep rates higher for longer, but did it work? I reckon the jury is still out on this one.
Fed chair Powell fell short of committing to a July rate hike, as you would expect, and reaffirmed that the next meeting will be a ‘live’ one. There were some minor tweaks to the statement and forward guidance but ultimately, the Fed is just opening the door to be flexible i.e. it can either continue “skipping” or hike again next month.
However, the infamous dot plots suggest that their job is not done yet. So, will policymakers follow through on that? Pardon my skepticism but this wouldn’t be the first time central bankers would have to walk back on their “commitment”.
Here’s a neat snapshot showing that the peak in the Fed funds rate this year has shifted higher to 5.60%:
The dollar reacted in somewhat mixed fashion. It rose right off the bat amid intentions of a more hawkish pause but markets quickly brushed that aside before the end of trading yesterday.
That is making for a bit of an uncomfortable spot for traders with EUR/USD hopeful for a break above its 100-day moving average and the 1.0800 mark. But looking elsewhere, USD/JPY is making a run higher as seen today to back above 141.00 as Treasury yields rebound higher as well.
Looking over to commodity currencies, USD/CAD is stumbling back towards the broken trendline resistance around 1.3338 while AUD/USD is still indecisive about breaking the April and May highs around the 0.6793-00 region. On the latter, the May high at 0.6818 is also a key resistance point on the daily chart.
It’s a bit of a bend but don’t break situation right now.