Mester Pushes For Larger Hike

Ahead of Fed chairman Powell’s comments at the ECB’s Sintra Forum today, markets are reacting to comments from Fed’s Mester who spoke earlier today. Speaking on CNBC, Mester said that she would be in favour of a further .75% hike in July, following on from the .75% hike in June. Mester told CNBC that “If conditions were exactly the way they were today going into that meeting — if the meeting were today — I would be advocating for 75 because I haven’t seen the kind of numbers on the inflation side that I need to see in order to think that we can go back to a 50 increase.”

These comments appear largely in line with the increased hawkishness we saw from the Fed at the last meeting. Along with the larger-than-projected hike, the Fed also upgraded its rates forecasts for the year ahead. In light of these comments, we are now likely to see July rate probabilities skewing towards a larger hike.

Technical Views

DXY

For now, the US Dollar is pulling back from the recent, fresh 2022 highs printed earlier this month. Price is now hovering around the 104.02 2020 highs. We’ve seen strong bearish divergence on momentum studies into these highs, raising risks of a deeper reversal. If we do fall deeper here, 101.17 will be the next support to note.