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Retail foreign exchange trader news scan as of 9:35 am AST; 4-week moving average ticks up by 2,500

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Federal Reserve reference rates

Interest on reserve balances: 5.40%

Discount window: 5.50%

Effective federal funds rate: 5.33%

Source: Board of Governors-Federal Reserve System

Foreign exchange rates

AUD/USD=0.6676

NZD/USD=0.6110

USD/JPY=154.6672

GBP/USD=1.2674

EUR/USD=1.0873

USD/CAD=1.3631

USD/MXN=16.7314

Source: x-rates.com, as of 7:21 am EST

Federal Reserve Bank of Minneapolis. Neel Kashkari. Inflation. While at the Williston Basin Petroleum Conference, Neel Kashkari explained the causes of inflation. He cited supply chains being gummed up combined with more demand for goods as result of pandemic had an effect on inflation. Russia’s invasion of Ukraine also created shock waves in the commodity markets. The central banks also need to address remaining demand in order to further combat inflation.

President Kashkari has observed that most are spending as if they are comfortable with the economy. Savings rate have fallen from seven percent to four percent. Also, the housing markets have been more resilient even in the face of rising mortgage rates.

President Kashkari is concerned about restrictive policy. How much downward pressure is monetary policy putting on the economy. The Fed may need to stay where it is a little longer to get a better understanding of where the economy is going.

Banks are little more optimistic than we think. Banks are seeing pent up demand for housing and do not appear short of segments in real estate where they can make loans.

The pandemic created a demand for cash and treasury markets started to freeze up. This activity created lower interest rates we are seeing now.

The yield curve is currently inverted. Right now, the US is not in recession, but the question remains how much downward pressure the Fed is putting on the economy.

Source: Federal Reserve Bank of Minneapolis

U.S. Department of Labor. Jobless claims. The U.S. Department of Labor today reported that the 4-week moving average for jobless claims was 217,750, an increase of 2,500 from the previous weeks revised average. The previous week’s average was revised up by 250 from 215,000 to 215,250.

Source: U.S. Department of Labor

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Alton Drew

16 May 2024

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