Related Insights
With good reasons, the DXY Index found support at 104 for the past week. Richmond Fed President Thomas Barkin warned of continued inflationary pressure from the reluctance of US businesses to give up raising prices. His concern was substantiated by the spikes in the prices paid indices in January’s ISM PMI Surveys for the services and manufacturing sectors. ISM also reported a jump in the services employment index to 50.5 in January from 43.8 in December, consistent with the above-300k readings in the nonfarm payrolls.
According to the New York Fed’s Survey of Consumer Expectations for January, US consumers were also more optimistic about their financial situation and credit access. The percentage of respondents expecting to be financially the same or better off 12 months from now was 76.5%, the highest level since September 2021. The findings were consistent with the spike in the Conference Board’s consumer confidence index from 105.8 in December to 114.8 in January, its highest level since December 2021. Over the next 6 months, consumers were less worried about fewer jobs, a decrease in income, or a weaker business outlook, obviously buoyed by stronger payrolls data, the record high US stock markets, and the market’s aggressive rate cut bets.
With many risks still on the table for the Fed’s inflation fight, Fed Governor Michelle Bowman reckoned it was too soon to project when and how much the Fed would cut rates, echoing Fed Chair Jerome Powell’s view that a rate cut was not the base scenario at the FOMC meeting on 20 March. Look for the same message from the Fed Presidents speaking this week, i.e., Austan Goolsbee (Chicago) on 14 February, Raphael Bostic (Atlanta), and Mary Daly (San Francisco) on 16 February.
On 15 and 16 February, Fed Vice Chair for Supervision Michael Barr will comment on monetary policy, bank regulation, and supervision. He will likely echo US Treasury Janet Yellen’s message to the Senate Banking Committee that the stress and losses from falling valuations in the commercial real estate sector was unlikely to pose a systemic risk to the banking sector. However, Yellen is closely monitoring the non-bank mortgage lenders, which lack access to deposits and the Fed’s discount window, rendering them reliant on short-term financing and vulnerable to having their credit lines pulled in stressful times.
Quote of the day
”If you want to conquer the world, you best have dragons.”
George R.R. Martin
13 February in history
In 1973, the USD devalued by 9% and 6% vs. the JPY and the DEM, respectively.
Topic
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