USD Slide Slows Down After Mixed Signals over Fed’s Plans

The dollar continued trading lower against most of its major counterparts, but the slide slowed, perhaps due to mixed signals on the Fed’s policy plans. Although Fed Chair Powell reiterated that some accommodation may be appropriate, Atlanta President Bostic and Richmond President Barkin saw no clear need for the Fed to ease. The core CPI rate ticked up to +2.1% yoy from +2.0%, also tempering expectations with regards to aggressive cuts.

Powell Reiterates Need for Easing, Bostic and Barkin Disagree

The dollar continued trading lower against most of the other G10 currencies yesterday. It gained only against the safe-havens JPY and CHF, while it traded virtually unchanged versus EUR. The greenback underperformed the most against SEK, NOK and AUD.

The weakening of the safe havens suggests that risk appetite may have remained supported yesterday. However, the picture painted by the performance in the equity world is more confusing. Major EU bourses ended their Thursday session mixed, while in the US, Nasdaq slid 0.08%, but the S&P and Dow gained 0.23% and 0.85% respectively, both hitting fresh record highs and aided by gains in health insurers after the Trump administration decided to drop a plan on drug-price rebates. Today, Asian indices were also mixed, with Japan’s Nikkei 225 and China’s Shanghai Composite gaining 0.20% and 0.44% respectively.

The mixed picture with regards to investors’ morale is supported by the mixed signals we got yesterday with regards to the Fed’s future course of action. Although when testifying before the Senate Banking Committee, Fed Chief Powell reiterated that trade concerns weigh on the US economic outlook and said that a somewhat more accommodative policy may be appropriate, Atlanta Fed President Bostic and Richmond President Barkin saw no clear need for the Fed to ease policy. On top of that, CPI data came in somewhat better than expected, pushing the probability for a “double cut” at the Fed’s upcoming gathering down to 20% from 30%. The headline CPI rate for June slid to +1.6% yoy from +1.8% in May, but the core…