Fed's Bowman says 'still work to do' on inflation
Fed Governor Michelle Bowman emphasized that significant efforts remain in combatting inflation, which reinforces expectations for the Federal Reserve's hawkish stance. Her comments signal that the FOMC is unlikely to pivot toward rate cuts in the near future, thereby supporting a stronger USD. This rhetoric arrives amidst ongoing concerns about inflation persistence and its implications for monetary policy, making it particularly salient as markets reassess Fed timelines.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). Reuters' take resonates with the upper end of our range, particularly reflecting JPMorgan's bullish outlook.
How firms align
JPMorgan maintains a target of 1.10, positioned in alignment with Bowman's comments implying sustained Fed tightening. Conversely, BofA's forecast at 1.04 departs from this sentiment, suggesting a more cautious approach.
What the data shows
Consensus forecasts reflect a firm belief in the USD's strength as inflation persists. Recent insights point to the Fed's continued focus on achieving its inflation targets, as detailed in /research/fed-inflation-strategy.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Bowman's comments reinforce a hawkish Fed narrative with sustained USD strength.
- 02Traders should monitor inflation-related data closely ahead of the next FOMC meeting.
- 03Expect further rate cut deferrals to extend well into 2025 as the Fed prioritizes inflation control.
Market implications
Watch for upcoming CPI data on the calendar; any surprises there could impact Fed positioning. Current volatility levels could create opportunities around the 1.075 consensus target as market reactions unfold.
Risks to this view
Should inflation metrics provide unexpectedly weak data or shifts in consumer sentiment emerge, this could challenge the current USD bullish view. A pivot by the Fed in response to such shifts could invalidate the bullish narrative.
Sentiment by currency
USD+EUR JPY GBPComposite USD score: +0.65
Sources & References
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