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The market does not react to comments from the Fed

The market does not react to comments from the Fed

created Forex ClubNovember 18 2022

Despite some hawkish comments from Federal Reserve officials, the dollar was unable to sustain its appreciation. The major currency pair fell to 1,03 after Bullard's words, but later rose again to 1,0390. Today in the morning we are seeing slight declines in quotations again.

The FED suppresses expectations

It is apparent that US officials are primarily trying to quell market expectations that the Fed may cut interest rates over the course of next year. The sentence that higher levels can be maintained for a longer time is emphasized many times.

Yesterday, the market was alive with the statements of James Bullard - the president of the Fed from St. Louis. He emphasized that Federal Reserve must raise rates to at least 5-5,25 percent. but he also stated that the upper limit could even approach 7 percent.

Let us recall, however, that Bullard is considered the most hawkish member of the Fed, so such statements should not impress the market much. In addition, Neel Kashkari admitted that before he opts for stopping rate hikes, he must first be fully convinced that inflation has stopped rising. He also added that how high interest rates should rise is an open question. Kashkari is also part of the camp that advocates a restrictive approach to monetary matters, so these words cannot be considered surprising and groundbreaking either.

No breakthrough in the charts

Looking at the futures market, from yesterday the valuation of the end of the entire cycle again indicated around 5%.. while the day before we saw slightly lower levels. However, there is no change in bias on the FX market so far. Deliberately (in my opinion) hawkish comments from the US central bank are not enough to lead to a significant correction of market expectations regarding rates.

Last week's hard data on inflation are for now the main argument for playing the Fed's "pivot".. Key US publications are missing this week, which is why the headlines of major foreign financial media are focused on comments. There is no breakthrough in the charts. EURUSD is in consolidation. Wall Street indices closed the day cosmetically negative and the short-term uptrend was not negated in any way.

Source: Łukasz Zembik, OANDA TMS Brokers

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