Brainard remains dovish – USD slides

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No change of tone from Fed voter Lael Brainard. She did say that there is some progress in achieving the inflation goal. However, her talk about the “New Normal” is certainly dovish. The policy should “guard” against a tilt towards the downside. She wants to see strength before acting. She does not want to remove accommodation too quickly.  Wage growth has been subdued. There may be more slack, says Brainard. 

The US dollar is dropping across the board. The fall is not huge, but unwinds some earlier movements. USD/JPY slides towards support at 101.50. EUR/USD is rising from the lows and GBP/USD is holding above 1.33.

FOMC member Lael Brainard speaks just before the Federal Reserve enters the “quiet period.” She is a permanent voter on the committee, and she is known to be dovish.

Speculation mounted about this speech. It was scheduled with a relatively short notice. A hawkish comment about a rate hike in September coming from a known dove would be a convincing “smoking gun.”

Earlier, the risk of a hike, as well as political worries, weighed on the mood. The safe-haven yen strengthened, and commodity currencies were on the back foot. Things have corrected since.

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