This post was originally published on this site.
Kevin Warsh cultivated a sense that he wasn’t going to offer much on rates or the economic outlook and that created a backlash that he would be opaque. Instead, we got a guy who repeatedly hammered the idea that the economy was hot and that underlying inflation is still too hot. He didn’t go as far to say the Fed was going to hike soon but he said — strongly — that the Fed would meet its inflation target.
It’s taken some time for the market to figure out how hawkish he was and pricing for a hike in September is up to 57% from 33% prior to his speech. That’s translated into dollar strength across the board.
The euro is quickly down to 1.1605 from 1.1643.
It’s the same across the board with the US dollar notably higher, though not exactly screaming higher. I think there’s a lingering sense that he’s in Trump’s pocket and that he won’t hike in the end. That’s capping some of the moves but I find it tough to believe in that thinking given his comments and the security of his position.
“We have work to do,” he said in what’s a clear signal, at least to me.
With the climb in the dollar, gold reversed lower and is down $33 after spiking to the highs of the day in a (misguided) move ahead of Warsh.
This article was written by Adam Button at investinglive.com.
