On May 27, Federal Reserve Governor Waller said that over time, neutral interest ratesBaccaratsetThe decline is likely to be caused by a major change in global demand for safe assets, but he warned that unsustainable fiscal spending could change that trend. "the United States is on an unsustainable fiscal path," Waller said in a speech at the Reykjavik economic conference in Iceland on Friday. If supply starts to outpace demand, it will mean lower prices and higher yields, which will put upward pressure on neutral interest rates. " "an important fact about r-star is that there is no reliable and simple way to determine its value," Waller said. " Still, policymakers are wondering whether higher interest rates have risen because the economy seems to have responded less than they expected. They estimated the median inflation-adjusted interest rate at zero in MarchBaccaratset.6%. Interest rates currently range from 5.25% to 5.5%, while the swap market pricing inflation in the coming year is just over 2%, which means that policy should be clearly restrictive, but the economy is still growing at a steady rate.
In addition, Goldman Sachs adjusted its forecast for the Fed's first rate cut, postponing its original July judgment to September. Earlier this week, we pointed out that to push for the Fed to cut interest rates in July, we need not only better inflation data, but also signs of significant weakness in economic activity or job market data, Goldman Sachs analyst Jan Hatzius said in his latest report on Friday. But an interest rate cut in July is unlikely to happen against the backdrop of stronger-than-expected manufacturing PMI data in May and a decline in first-time claims for unemployment benefits. Goldman's latest forecast is in line with market expectations, with a 54% chance of a rate cut in September, compared with a 12% chance in July, according to FedWatch Tool. According to the pricing of the swap market, the Fed's first rate cut was fully priced in December, and the chances of a second cut are less than 40 per cent, up from about 70 per cent last week. JPMorgan Chase and Citi are among the few investment banks that still expect action in July.
There is not much data to pay attention to today, only the German IFO business climate index in May is worthy of attention.
Dollar index
The dollar index fluctuated downwards on Friday, closing slightly lower on the daily line, and is now trading around 104.70. In addition to profit-taking, which constitutes a certain pressure on the exchange rate, the technical selling order formed near the 105.00 gate is also an important factor to pressure the exchange rate to fall. However, the overall good performance of economic data in the United States and the Fed's expectations of interest rate cuts during the year have limited the room for a correction in the exchange rate. Today, we will focus on the pressure situation near 105.20, with the lower support around 104.20.
EUR / USD
The euro fluctuated upwards last Friday, closing slightly higher on the daily line, and is now trading around 1.0850. In addition to the short covering and the technical buying formed near the 1.0800 mark, the good performance of the GDP data released by Germany during the period of time also provided a certain support to the exchange rate. However, the ECB's expectation of a rate cut in June limited the room for a rebound. Today, we will focus on the pressure situation near 1.0950, with the lower support around 1.0750.
Sterling / dollar
The pound fluctuated upward on Friday, closed slightly higher on the daily line, and is now trading around 1.2740. In addition to the short covering and the technical buying formed near the 1.2700 mark, the decline of the dollar index from the 105.00 mark is also an important factor supporting the rise of the pound. However, the weak economic data released by the UK during the period limited the room for the exchange rate to rebound. Today, we will focus on the pressure situation near 1.2850, with the lower support around 1.2650.