Fed's Collins says more rate hikes are coming, Bloomberg Television reports
Boston Fed President Susan Collins has signaled a hawkish shift in the Fed's monetary policy approach, indicating that more interest rate hikes may be on the horizon due to persistent inflationary pressures. This is particularly relevant as markets navigate ongoing debates regarding the Fed's inflation targets and the potential trajectory of rates. The emphasis on future hikes reflects a broader concern over the entrenched nature of inflation, which complicates the Fed's ability to pivot towards a more dovish stance in the near term.
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). This positioning reflects the market’s reaction to the potential implications of further rate hikes while grappling with inflation data.
How firms align
JPMorgan's target of 1.10 aligns with Collins' hawkish comments, suggesting a readiness to adapt to increasing rate expectations. Conversely, BofA’s lower target of 1.04 indicates a more cautious view on the USD's strength in the face of potential economic headwinds. Refer to our internal /reports/jpmorgan and /reports/bofa pages for detailed analysis.
What the data shows
Recent forecasts have highlighted a tightening range among firms as they adjust to shifting rate expectations. Firm commentary points towards a heightened sensitivity to inflation indicators, particularly in the wake of Collins' remarks on future rate increases. See our related Insight at /research/inflation-hike-sensitivity for more context.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Hawkish Fed comments increase the likelihood of further rate hikes.
- 02Expect volatility in USD as markets react to inflation data.
- 03Focus on upcoming economic indicators for further rate perspective.
Market implications
Investors should watch for significant resistance levels around 1.08 in EUR/USD, particularly in the wake of inflation data releases. The consensus target of 1.075 is crucial for gauging short-term positioning as more data comes in.
Risks to this view
A reversal in this view could occur if inflation data unexpectedly cools, allowing the Fed to reassess its rate hike trajectory. Additionally, geopolitical developments could shift market focus away from domestic monetary policy.
Sentiment by currency
USD+EUR JPY GBPComposite USD score: +0.70
Sources & References
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