Federal Reserve Governor Waller stated that recent economic data suggests that policymakers can approach the issue of subsequent rate cuts with less urgency than they did at last month's meeting. In a prepared speech at a conference held at the Hoover Institution at Stanford University in California on Monday, Waller said, "I believe the overall data indicates that monetary policy should be more cautious in the pace of rate cuts than it was at the September meeting." He added that if the current economic conditions persist, "we can shift policy towards a neutral stance at a prudent pace." A neutral policy interest rate is one that neither promotes nor inhibits economic growth. Waller pointed out that the latest labor market data shows a decrease in unemployment rates amid strong hiring, and employment growth in previous months has been revised upward. At the same time, Waller called the latest inflation data higher than expected and "disappointing." Waller said that the economic foundation is solid, with the employment rate close to the Federal Reserve's target and the inflation rate close to the 2% target set by policymakers. However, he added that recent data—including upward revisions to economic growth and increases in job vacancies—indicate that the extent of the economic slowdown may not be as expected.
Additionally, on Monday, Minneapolis Fed President Kashkari indicated that it seems appropriate for the central bank's benchmark interest rate to be "further slightly reduced" in the coming quarters. Kashkari said at a conference held in Buenos Aires, Argentina, on Monday, "Ultimately, the direction of policy will be determined by actual economic, inflation, and labor market data. The underlying inflation rate in September was higher than expected, and the latest data from the US labor market shows a decrease in unemployment rates amid stable hiring. Kashkari stated that the labor market remains strong, and the recent employment report is "encouraging, and a rapid weakening of the labor force does not seem to be imminent." He added that the inflation rate "has fallen significantly from its peak but is still slightly above our target." Kashkari had previously expressed satisfaction with the Federal Reserve's rate cut in September and believed that cutting rates by 25 basis points at each of the two remaining meetings this year is a "reasonable starting point." According to the median estimate released last month, Federal Reserve policymakers expect the central bank to cut rates by another 50 basis points for the remainder of 2024.
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Data to watch today includes the UK's August unemployment rate, Germany's October ZEW economic sentiment index, the US October New York Fed Manufacturing Index, Canada's September unadjusted CPI year-over-year rate, and the US September New York Fed one-year inflation expectation.
US Dollar Index
The US Dollar Index fluctuated higher yesterday, closing slightly higher on the day, and is currently trading near 103.20. The continued cooling of expectations for significant rate cuts by the Federal Reserve is the main reason supporting the sustained rebound of the US Dollar Index. In addition, optimistic remarks from Federal Reserve officials also provided some support for the exchange rate. Federal Reserve Governor Waller stated that strong economic data indicate the need to slow the pace of rate cuts. Today, focus on the resistance near 103.70, with support near 102.70.
Euro/USD
The Euro fluctuated lower yesterday, briefly breaking through the 1.0900 level and reaching a 10-week low, and is currently trading near 1.0910. In addition to the US Dollar Index rising due to optimistic remarks from Federal Reserve officials and cooling expectations for significant rate cuts, investor expectations for rate cuts by the European Central Bank also put some pressure on the Euro. Today, focus on the resistance near 1.1000, with support near 1.0800.
Pound/USD
The Pound fluctuated lower yesterday, closing slightly lower on the day, and is currently trading near 1.3060. In addition to the US Dollar Index rebounding continuously due to multiple favorable factors, which is the main reason for the Pound's softening, expectations for rate cuts by the Bank of England are also an important factor pressuring the Pound. However, expectations for rate cuts by the Federal Reserve still exist, limiting the downside of the exchange rate. Today, focus on the resistance near 1.3150, with support near 1.2950.
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