Fed’s Daly is prepared to back another 0.75 percentage point rate hike, but US dollar bleeds out
|The Wall Street Journal reported that San Francisco Fed President Mary Daly A said Friday she was prepared to support another rate increase of 0.75 percentage point at the central bank’s next meeting, on July 26-27, to counter inflation, which is at a 40-year high.
Several other Fed officials endorsed such a move over the past week.
Daly said that the central bank needs to raise interest rates to levels designed to slow economic growth and combat inflation and that those levels will depend on factors outside of the Fed’s control.
US inflation has accelerated to an 8.6% annual rate in May, its fastest pace in 41 years and is a factor raising the risk of US recession.
Meanwhile, the US dollar has been pressured of late as markets reaccess the Fed's path and the greenback posted its first weekly decline this month.
DXY update
A significant factor this week has been the fall in oil and commodity prices, which has eased inflation fears leading to a return to risk appetite. This has eroded the safe-haven bid that has been boosting the dollar against major currencies:
We have seen the price action in DXY play out as follows:
A break of structure, BoS, would be expected to lead to a sell-off as illustrated above.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.