When companies stop driving a hard bargain, Cleveland Fed President Beth Hammack starts worrying
Cleveland Fed President Beth Hammack's recent remarks underscore concerns over persistent inflation and the discernible pricing power of businesses, suggesting that interest rates may still need to rise. Hammack's indications reinforce a hawkish stance, diminishing hopes for imminent rate cuts, thereby lending support to the USD. This perspective is particularly pertinent as we navigate a landscape of entrenched inflationary pressures coupled with a resilient economy, potentially impacting monetary policy direction in the near future.
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). The insights provided by the Cleveland Fed highlight a wider narrative that aligns with the more hawkish expectations from some firms in our coverage.
How firms align
JPMorgan holds an aligned position with a target of 1.10, indicating a belief in continued upward pressure on the USD as the Fed remains vigilant on inflation. Meanwhile, BofA reflects a contrary stance at 1.04, suggesting a more cautious approach amid economic uncertainties, as detailed in our internal reports.
What the data shows
Recent reports illustrate that firm expectations for inflation persist, pushing forecasts for near-term economic conditions. For more insights, refer to /research/inflationoutlook.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Hammack's remarks signal potential for further rate hikes, supporting USD.
- 02Traders should note the heightened risk of persistent inflation impacting monetary policy.
- 03Market reaction may hinge on upcoming data releases or Fed commentary.
- 04A shift towards dovish signals would challenge the current bullish USD view.
Market implications
Investors should monitor key data releases, particularly inflation metrics, which could reinforce or alter market expectations for Fed policy. Support levels to watch include 1.0700 in EUR/USD, as deviations could influence larger shifts in USD strength.
Risks to this view
If upcoming inflation data consistently indicates a slowdown, or if the Fed signals a readiness to pivot to a more dovish stance, this could undermine the bullish outlook on the USD and prompt reassessments in market positioning.
Sentiment by currency
USD+EUR JPY GBPComposite USD score: +0.70
Sources & References
How we cover this story