FOMC’s Williams Indicates Terminal Rate of 5.1%

FOMC member Williams yesterday made comments seen as hawkish in which he indicated a relatively high terminal rate of 5.1% would be reached over the coming months, implying further rate hikes.

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1. FOMC Member Williams made public remarks yesterday which the market took as hawkish on monetary policy and bullish on the US Dollar. Williams indicated he expects the Fed to reach a terminal rate in 2023 of 5.1%, meaning further rate hikes. Markets were already leaning towards this interpretation, its just a minor reinforcement, so has not resulted in any major price movements. Its main effect is to keep US treasury yields relatively high and looking like rising further over the coming days.
2. Stock markets are mostly higher over the recent Asian session, recovering some ground after yesterday’s losses. Both the S&P 500 and the NASDAQ 100 indices closed down yesterday, with the 4100 area looking likely to act as a very pivotal point for the S&P 500. The S&P 500 Index made a golden cross last Thursday. This is typically a strong long-term buy signal, although the price has fallen since then.
3. The Australian Dollar is gaining again against other currencies following the Reserve Bank of Australia’s implementation Tuesday of a 0.25% rate hike and language in its rate statement which made clear it expects to see further rate increases over the near future.
4. Some commodities did quite well yesterday, with some continuing to rise after having recently made significant bullish breakouts, notably Sugar and Orange Juice.
5. In the Forex market, the New Zealand Dollar is the strongest currency right now, while the US Dollar is the weakest, putting the NZD/USD currency pair in focus. There is some interest in the EUR/USD currency pair today as it remains within a valid long-term bullish trend and has bounced from recent lows.
6. British monetary policy report hearings are taking place today, with the governor of the Bank of England testifying before the British parliament, which could cause some volatility in the British Pound.
7. A German inflation rate of 8.7% is expected for January 2023.
8. Daily confirmed new global coronavirus cases decreased last week for the seventh consecutive week.
9. Total confirmed new coronavirus cases worldwide stand at over 676.8 million with an average case fatality rate of 1.00%. Daily new confirmed cases have fallen to a low level not seen since June 2020.