Conclusion of the Forexlive Americas FX news on April 18: the head of the Fed is more hawkish. The head of the ECB is accommodating.
As the trading day draws to a close, the CAD and USD end up as the strongest of the major currencies and the EUR is the weakest. However, the gap between the strongest and the weakest was relatively close.
Today’s economic calendar saw the Philadelphia Fed’s manufacturing index rise to meet expectations of 15.5 from 2.3. Initial unemployment claims continue to show constant strength. Subsequently, existing home sales proceeded as planned.
The US dollar received a boost after Fed officials continued to be more hawkish/less dovish than .
New York Fed President Williams spoke about the current state of the economy and the Federal Reserve’s monetary policy, saying he does not feel the urgency to cut interest rates for the moment. He stressed that the economy is strong and economic imbalances have been reduced, suggesting that the Fed’s current rates have not slowed the economy too much. Williams stressed that monetary policy is currently well positioned, but acknowledged that interest rates will eventually need to be lowered based on economic activity. He also mentioned that further rate hikes were not his baseline forecast, but that the Fed would consider them if the data supported such a move. Additionally, he reiterated the importance of the Fed’s 2% inflation target and the need for the Fed to continue working to reduce inflation. Williams also said he was monitoring China’s economic performance, indicating its potential impact on the global economy. U.S. rates and the U.S. dollar rose after Williams left the window open for a rate hike (even though that wasn’t his benchmark).
Later in the day, Atlanta Fed President Bostic reiterated his recent view. He cited concerns about current inflation levels in the United States, saying they remain too high and acknowledging that significant progress is still needed to control inflation. Despite the urgency of the situation, Bostic said he was prepared to approach the adjustments with patience, emphasizing that there was no need to rush the process. He suggested that keeping jobs and wages stable, while ensuring inflation moves closer to target, could justify keeping interest rates steady for now. Bostic remains optimistic about the economic outlook, predicting no recession and forecasting continued growth as the economy more closely aligns with the Fed’s dual mandate. He said, however, that any potential rate cuts would likely not happen before the end of the year.
Fed officials are considering a cut, but when is anyone’s guess. However, it is not June and July, but rather September which is probably the first.
Unlike the more hawkish Fed, the ECB’s commentary today had a common theme of a rate cut in June.
The ECB’s Knot said he was satisfied with market expectations for rate cuts, reflecting a positive outlook on the disinflationary process. He indicated a stance in line with market sentiment, which anticipates a rate cut in June. Meanwhile, the ECB’s Nagel also commented, forecasting a cautious rate cut from June, suggesting a coordinated and gradual approach to monetary policy easing within the ECB as inflationary pressures begin to ease. ‘mitigate.
The ECB’s Rehn spoke later and discussed the current state of inflation, noting its convergence towards the ECB’s 2% target. He stressed that current monetary tightening has effectively helped reduce inflation and its broader impact on the real economy. Rehn stressed that although ECB rates have played a crucial role in the disinflation process, there is no longer any need to maintain them at the current high levels for an extended period. He said that, assuming there are no further geopolitical or energy price setbacks, it would be appropriate to start easing monetary policy and consider rate cuts as early as June, provided to be sure that inflation will continue to approach the 2% target in the long term.
Today at the Bank of England, the BOE’s Greene commented on the latest economic indicators and was a little more hawkish. She noted that recent wage data shows a substantial increase in wage growth, which, although high, is moving in a favorable direction. Despite this, the latest inflation data slightly exceeded expectations, presenting a challenge to achieving a sustainable return to the BoE’s 2% inflation target. Greene highlighted inconsistencies between wage growth and service price inflation, which could hamper progress toward stabilizing inflation. He also mentioned that the UK labor market is starting to ease but remains relatively tight, projecting that inflation could reach target in the coming months but is unlikely to remain stable. Greene therefore does not foresee a rate cut in the near future.
A look at other markets at the end of the day:
- Crude oil is trading down around $0.85 or -1.03% $81.84
- Spot gold rose $18.07 or 0.76% to $2,378.50.
- Silver was little changed at $28.22.
- Bitcoin moved higher to $63,496. At the start of the day, the price was trading at $62,800.
U.S. stocks were mixed, with the Dow Jones industrial average rising slightly. The broader S&P and NASDAQ indexes both fell
- The Dow Industrial Average rose 0.06%
- The S&P index fell -0.22%
- The NASDAQ and I fell -0.52%
All three indexes are down heading into the final day of the trading week. The S&P and Dow are poised to close lower for the third straight week. The Nasdaq is down for the 4th consecutive week.
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