Trading insight: Risk of more Fed rate hikes even though headline inflation is slowing?

Source: Tradingview May 12 2023 7:14 UTC

The above chart illustrates the US inflation rate year on year trend.

Market Talk

The power of words - USD strengthens on talks that a US Fed governor sees risk of more rate hikes despite slowing headline inflation

• Fed governor Michelle Bowman said “Recent economic data have not provided evidence that inflation is on a clear downward path”
• Indeed the Fed could be correct in not ruling out further rate hikes since US core inflation remains “sticky”

The above chart illustrates the US personal consumption expenditures price index (PCE) month on month trend.

---

Today’s economic calendar

United Kingdom GDP update

• Month on month -0.3% (March data)
• GDP 3 month year on year 0.5%

GBP FX Market reaction:

• GBP strengthens slightly
• EUR/GBP trend conditions bearish outlook
• GBP/USD current price 1.2527; seeking to hold above support near its 25 day moving average 1.23

Norway GDP increases

• GDP month on month increased from -0.1% to 0.4%

NOK FX Market reaction

• NOK strengthens against the USD on the release of the GDP data; however, the USD/NOK (daily chart) remains bullish above 10.43

Source: TradingView / J. Knobel May 12 2023 6:46 UTC

---

USD FX cross rate 5 day percentage look back

Source: TradingView May 12 2023 7:26 UTC

• USD/JPY current price 1.3487 vulnerable towards the downside if the 133.5 support fails to hold, upside risk seen near the 135.5s.

• USD/CAD current price 1.3485. The bounce off the 1.33 support opens the prospect for an advance towards the 50 day moving average near the 1.3580s. Downside risk seen below the 1.33 key support.