1.13 in play via European inflation
Updated
A good chance for a quick update to the EURUSD chart since Fed.
As anticipated, Fed leaving the target range unchanged. On the whole there are no major changes in policy, Fed acknowledging economic growth and labour market remains strong but inflation is soft below target.
Cutting the Interest on Excess Reserves (IOER) was something we discussed live here in the Telegram. For those asking the reason I ‘knew’ this was coming … from experience it was a result of the decline in supply of bank reserves since Easter. The Effective Fed Funds Rate (EFFR) was only 5bps below the top end in the target range, simply meaning the quickest and healthiest way to return to the mid point is via IOER cuts.
Those following since last year will know the Fed made two similar moves and we might see them forced to make another later this year. The supply of reserves will continue to fall with QT which lasts till the end of September. Btw this is where the term ‘corridor system’ comes from… it is seen in European central banks as the IOER remains below the mid point target.
The knee-jerk reaction here was taken as dovish on the headline but with Powell confirming the Fed is on hold and cuts are not around the corner US yields ended higher putting the USD in bid.
Here building positions once more in the NY session for a test of 1.13 with overshoots in EZ inflation tomorrow.
As anticipated, Fed leaving the target range unchanged. On the whole there are no major changes in policy, Fed acknowledging economic growth and labour market remains strong but inflation is soft below target.
Cutting the Interest on Excess Reserves (IOER) was something we discussed live here in the Telegram. For those asking the reason I ‘knew’ this was coming … from experience it was a result of the decline in supply of bank reserves since Easter. The Effective Fed Funds Rate (EFFR) was only 5bps below the top end in the target range, simply meaning the quickest and healthiest way to return to the mid point is via IOER cuts.
Those following since last year will know the Fed made two similar moves and we might see them forced to make another later this year. The supply of reserves will continue to fall with QT which lasts till the end of September. Btw this is where the term ‘corridor system’ comes from… it is seen in European central banks as the IOER remains below the mid point target.
The knee-jerk reaction here was taken as dovish on the headline but with Powell confirming the Fed is on hold and cuts are not around the corner US yields ended higher putting the USD in bid.
Here building positions once more in the NY session for a test of 1.13 with overshoots in EZ inflation tomorrow.
Note
First targets hit ... taking chips off the table and trailing stops Note
Sharing an update from this morning on live chat.... Note
A quick update to the intraday flows here: Note
Aggressively trailing stops here ... after failing to clear 1.126 this morning there is no point holding for much longerTrade closed: target reached
Flat
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