Lael Brainard is on the Fed's Board of Governors is speaking to the Community Bankers Roundtable in Scranton, Pennsylvania:

Thank you to my colleague Pat Harker for the invitation to join him here this evening. In my time at the Federal Reserve, I have found that hearing directly from people around the country about how their communities are experiencing the economy is vital to carrying out my responsibilities. It helps me to understand what is working well and what the challenges are, and it provides ideas on how to improve economic opportunities. Today I look forward to hearing your perspective on the economy and the banking business in and around Scranton.

  • Says downside risks, soft inflation argue for easing monetary policy.
  • Says judgment on appropriate path of rates will depend on evolution of data, risks.
  • Says economy is growing solidly.
  • Says financial markets supportive of growth.
  • Says capital spending is lackluster, business sentiment soft.
  • Business sentiment, investment are sensitive to trade, global outlook uncertainty.
  • Says downside risks, if they materialize, could weigh on economic activity.
  • Says she's mindful that financial imbalances are growing, should address with countercyclical capital buffers, stress tests, monitoring of leveraged lending.

Fed’s Kashkari has been crossing the wires, speaking at a Townhall event in Dakota. He is in a long list of Federal Reserve speakers making their opinions known, none of which have been particularly favourable to the dollar.

Key comments:

  • Sought half-point cut in June to re-anchor inflation.
  • Not at full economic capacity until wages pick.
  • Wants no rate hikes until inflation strengthens.
  • Quarter point cut would not be enough of a shock – perhaps need 50bp cut.

Fed speakers from earlier:

  • Federal Reserve's Williams: Growth outlook outside the U.S. has dimmed
  • Fed’s Bostic: H1 growth stronger than expected

  • Powell speech: Bad outcomes have happened when central bank independence is diminished

  • Fed's Bostic: Sceptical inflation expectations are weak

  • Powell speech: Policy has not been as accommodative as we thought

  • Fed's Barkin: Rate cuts, if needed, would stimulate the economy in many ways

  • DJIA, ended with a gain of 227.8 points, or 0.85%, to reach 27,088.
  • The S&P 500 index closed in a bit shy of 3,000 with +6.84 points gain.
  • The Nasdaq bucked the trend despite marking the intraday high with a closing loss of 6.49 points to 8,196.

Despite the US inflation numbers pouring cold water on the Fed’s easing bias, markets remain attentive to the Fedspeak on Thursday. However, equity bulls seem to have retracted their buying bets amid fear of the beginning of the new easing cycle, taking clues from the global central banks. As a result, an initial rally in stocks couldn’t last until the end.

Details suggest, the Dow Jones Industrial Average, DJIA, gained 227.88 points, or 0.85%, to 27,088.08, while the Nasdaq Composite lost 0.08%, to 8,196.04. The S&P 500 index finished 6.84 points higher at 2,999.91 a gain of 0.23%.

Some of the notable Fed policymakers like Federal Reserve Bank of New York President John Williams and Federal Reserve Governor Randal Quarles held their easing bias intact while offering additional back up to the Fed Chair Powell’s second-day Testimony.

On the trade front, the US President Donald Trump again took on his Twitter to criticize China’s latest turnaround from the US farm productions, offering another barrier to tackle during the on-going trade talks.

Treasury yields were on the spike with the US 10-year treasury yield gaining nearly 8 basis points to 2.143% by the press time.

Today’s US Producers’ Price Index (PPI) and the on-going slew of comments from the US Federal Reserve policymakers can keep entertaining global investors on Friday.

DJIA levels

While sellers aim for the 24,800 recent swing bottoms, 127.2% Fibonacci extension around 28,500 can flash on the bull’s radar.

  • USD/JPY reversed its intraday losses and bounced above the 108.00 figure.
  • 108.60 is the level to beat for bulls.

USD/JPY daily chart

USD/JPY is trading in a bull leg below the main daily simple moving average (DSMA). The market is rebounding from the 108.00 figure.

USD/JPY 4-hour chart

The market is trading above its main SMAs suggesting bullish momentum. Bulls need to break above 108.60 to reach 108.90 on the way up, according to the Technical Confluences Indicator.

USD/JPY 30-minute chart

USD/JPY is trading between the 50 and 100 SMAs suggesting a consolidation in the near term.
Immediate support can be seen at 108.28 and 107.85, according to the Technical Confluences Indicator.

Additional key levels

Trump is crossing the wires and has said that he wants lower interest rates and says that there is no inflation.

Additional comments:

  • Will be calling a big meeting of technology companies in a week or two.
  • Asking social media firms’ officials to come to the White House.
  • Recently met with Google, Twitter executives.
  • Pursuing new option on citizenship count, will leave no stone unturned.
  • Not backing down from effort to determine citizenship status of US.

Fed's Williams has been crossing the wires today and came with additional comments as follows:

  • Arguments for adding policy accommodation have strengthened over time.
  • Uncertainties around trade, global growth have not improved.
  • Not seeing uncertainties shifting in a positive direction.
  • Market expectations of rate cuts are showing up in easier financial conditions.
  • Data suggests labour mkts aren’t as tight as he used to believe.
  • Says his view of the natural employment rate has been lowered.
  • Issues facing fed include uncertainties around us. economy, growth going forward, infl. below goal.
  • Carefully watching inflation, including possibility of infl. expectations falling.
  • Sees us interest rates as neutral.

Fed Williams earlier comments:

Federal Reserve's Williams: Growth outlook outside the U.S. has dimmed

Analysts at Wells Fargo, expect the Federal Reserve (Fed), the European Central Bank (ECB) and other G10 central banks to continue easing monetary policy as their respective economies slowdown, in particular the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ).

Key Quotes:

“While the G20 summit did not result in a comprehensive trade deal, the outcome was certainly something to cheer about. In late June, President Trump and President Xi agreed to resume negotiations towards finalizing a trade deal, while they also agreed to not impose any additional tariffs for the time being. The trade truce may help support China’s economy, especially after some weak activity and sentiment data in May and June; however, we maintain our forecast for the Chinese economy to grow 6.1% in 2019 and 6.0% in 2020.”

“Global monetary policy continues to move in a dovish direction, led by the Fed. Fed Chairman Powell’s recent statements are consistent with a July rate cut, while the June Dot Plot indicates several FOMC policymakers expect multiple rate cuts this year. In response to a dovish Fed, we believe many emerging central banks will pursue policy rate cuts before the end of the year, which should provide some support to emerging GDP growth towards the end of 2019 and into 2020. As of now, we forecast developing economies to grow 4.0% in 2019 and to accelerate to 4.3% in 2020.”

“We expect G10 central banks to pursue easier monetary policy by the end of the year as well. Given deteriorating growth and inflation dynamics in Europe, we now expect the ECB to cut rates in September, while we also expect the Reserve Bank of Australia and the Reserve Bank of New Zealand to continue cutting rates this year.”

  • Mexican peso rises versus US Dollar, continues to recover from Urzúa’s resignation losses.
  • USD/MXN trades below 19.10, but still above the level it had a week ago.

The USD/MXN is trading at 19.08 at the lowest since Tuesday, supported by the improvement in risk appetite. Earlier today the pair peaked at 19.16 and during the American session turned to the downside.

Today it was published that U.S. underlying consumer prices increased by the most in nearly 18 months in June. Excluding the volatile food and energy prices, core inflation rose 0.3% m/m in June. However, the market will likely not change expectations that the Federal Reserve will cut interest rates this month”, wrote BBVA analysts.

US CPI data pushed the greenback modestly to the upside and sent US yield significantly higher. The US Dollar straightened against majors but kept a bearish tone versus most of the emerging market currencies, particularly Latin Americans.

The USD/MXN is about to post the second decline in a row as it retreat further from the peak it reached on Tuesday at 19.36 following the resignation of Carlos Urzúa as Finance Secretary. Still, it is positive for the week but the pressure on the Mexican peso eased.

Banxico: One member ask for a rate cut

The minutes from the last meeting of the Bank of Mexico showed that Board member Gerardo Esquivel-Hernández voted in favor of reducing rate 25 basis points to 8.00%, against the majority that favored a no change. The meeting took place before the last move higher of USD/MXN that followed the resignation of the Finance Secretary.

According to Esquivel inflation has exhibited a better performance than the one forecasted in previous Quarterly Reports and is on a convergent path to the target. “I estimate that by December 2019, inflation will be very close to or even below 3.4%, that is, in line with the forecasts of last year’s Quarterly Reports. In addition to the above, there are other elements that must be considered in the determination of the target interest rate: the announced loosening of the monetary policy of advanced economies and the noticeable economic deceleration in the country. These factors open a space to be able to cut the interest rate in 25 basis points without putting at risk nor compromising the fundamental mandate of Banco de México.”