Dollar Edges Lower After Waller’s Rate-Cut Comment: Inside G-10
The dollar edged lower against most Group-of-10 peers after Federal Reserve Governor Christopher Waller said the central bank should cut rates at its next meeting.
Bloomberg Dollar Spot Index slipped 0.1%, while the yield on 2-year Treasuries fell two basis points to 3.88%
With limited risk to price pressures and inflation within target, the Fed shouldn’t wait until the labor market deteriorates before it cuts, Waller said in the text of a speech. “I believe it makes sense to cut the FOMC’s policy rate by 25 basis points two weeks from now”
NOTE: Traders are pricing effectively a zero chance of a rate cut at its July meeting, according to swaps data compiled by Bloomberg
Fed Chair Jerome Powell pushed back against criticism over a $2.5 billion renovation project at its headquarters in Washington, saying the bank takes its responsibility to be good stewards of public resources seriously. Waller blamed part of the cost overrun on inflation. A Republican lawmaker indicated they’ll refer Powell to the Department of Justice for investigation
“The USD remains vulnerable to the downside if concerns about US policymaking further undermine investor confidence in USD assets,” said Carol Kong, a strategist at Commonwealth Bank of Australia in Sydney
USD/JPY little changed at 148.60
Japan’s key price measure cooled to 3.3% y/y in June, a tad more than expected while remaining well above the Bank of Japan’s target. Eyes shift to Japan’s upper house election this weekend
READ: Hedge Funds Rein In Japan Bets, Saddling Banks With Unsold Bonds
AUD/USD rises 0.3% to 0.6504
Waller’s comments have spurred leveraged sales of USD, causing residual AUD shorts from Thursday’s jobs data to cover positions, according to Asia-based traders
NZD/USD gains 0.3% to 0.5951
EUR/USD adds 0.2% to 1.1623
Source: Bloomberg
