(Original title: Bangda Asia: Good data U.S. bond yields rise, the dollar index stops falling and rebounds)
Source: Financial World Network
Atlanta Fed President Bostic said on Thursday that he expects the United States to raise interest rates later in 2022. At the same time, he expects that the U.S. economy will continue to grow and inflationary pressures will continue. The central bank official told CNBC that he “expected” to raise interest rates at the end of the third quarter or the beginning of the fourth quarter of 2022. This expectation makes him the more hawkish side of Fed officials, who currently have roughly the same number of officials on whether they will tighten their policies next year. “Frankly, the experience we have gained from the epidemic is really surprising,” he said. “I really adjusted my expectations and continue to move forward.” Bostic’s speech came at a time when some economic data has slowed recently. The Atlanta Fed’s own GDP tracking agency estimated that GDP growth in the third quarter was only 0.5%. He said he believes that some of the obstacles due to the new crown pandemic will disappear and clear the way for stronger growth. However, he believes that inflation is a challenge that will not disappear anytime soon. Other Fed officials said that the current wave of inflation, which is at a 30-year high, is temporary. Bostic denied this claim. He said that price pressures are showing up throughout the economy and will affect economic growth and policies.
In addition, Quarles pointed out in a speech at the Milken Institute conference in Los Angeles that since the middle of last year, the Fed has been making at least $120 billion in asset purchases every month to provide additional stimulus to the economy. Quarles said that he agrees with Fed colleagues and other economists that “inflation may drop significantly from the current very high level next year”, and pointed out that this round of inflation is due to supply issues and restrictions caused by the new crown epidemic. This is caused by the surge in demand to reopen the economy and labor shortages. Quarles admitted that the current inflation rate is more than twice the long-term goal of the Federal Open Market Committee (FOMC). Quarles said that he will support the decision to reduce debt purchases as soon as possible, which will “fully in line with the Federal Open Market Committee’s long-term goal of maximizing employment and price stability, as well as a new monetary policy strategy.” I think it’s clear that we are here. The employment and inflation targets have been tested for further substantive progress. I support the decision to start QE reduction at the November meeting and complete this process in the middle of next year. To reduce the size of monthly bond purchases on this timetable and end them is not a monetary tightening, but a gradual reduction in our pace of increasing easing.
The data to pay attention to today are the monthly rate of retail sales in the United Kingdom in September, the initial value of the Markit manufacturing PMI in the euro zone in October, the initial value of the Markit service industry PMI in the United Kingdom in October, the initial value of the Markit manufacturing PMI in the United Kingdom in October, and Canada 8. Monthly retail sales monthly rate and the initial value of Markit manufacturing PMI in October in the United States.
Dollar index
The U.S. dollar index fluctuated up yesterday, and the daily line closed up slightly, and the spot exchange rate was trading around 93.70. In addition to short-covering which constitutes a certain degree of support for the exchange rate, the good economic data of the United States during the period is also an important factor supporting the rebound of the US dollar index. In addition, the higher U.S. bond yields and the hawkish remarks made by Fed officials during the period also supported the exchange rate to a certain extent. Today, we are concerned about the pressure situation near 94.20, and the support below is near 93.20.
EUR/USD
The euro fluctuated down yesterday, and the daily line closed down slightly. The current exchange rate was trading at around 1.1630. In addition to profit-taking, which constitutes a certain amount of pressure on the exchange rate, the dollar index rebounded under the combined support of strong economic data, higher U.S. bond yields and hawkish comments by Fed officials, which is the main reason for the pressure on the euro to fall. However, the economic data released by the Eurozone during the period performed well, limiting the room for the exchange rate to fall. Today’s attention is paid to the pressure situation near 1.1700, and the lower support is near 1.1550.
GBP/USD
The pound fluctuated downward yesterday, and the daily line closed down slightly, and the current exchange rate was trading at around 1.3810. In addition to profit-taking, which constitutes a certain amount of pressure on the exchange rate, the US dollar index rebounded under the combined support of good economic data and hawkish comments by Fed officials and other favorable factors, which is the main reason that pressured the pound to fall. In addition, the weak performance of the economic data released by the United Kingdom during the period also exerted certain pressure on the exchange rate. However, the Bank of England’s interest rate hike is expected to limit the room for correction of the exchange rate. Pay attention to the pressure situation near 1.3900 today, and support below 1.3700.