Federal Reserve’s Mester: Trade tariffs are a headwind that must be taken seriously – CNBC

• Federal Reserve’s Mester, on  CNBC: Policy to be recalibrated if necessary.
• FX implications: Nothing new here form the Fed speaker and the US Dollar can remain the most favoured of dirty shirts.

Federal Reserve’s Mester, on  CNBC, has said that the current policy is accommodative.

Key comments:

• Policy to be recalibrated if necessary.
• Fed will not overreact if inflation goes ‘a little’ above target.
• ‘Reasonably close’ to 2% inflation target.
• US  economy is doing pretty well overall.
• Trade tariffs are a headwind that must be taken seriously.
• Knew there would be a slowdown in 2019, question is if the slowdown is more than expected.
• Important to look at incoming information before meeting.

FX implications:  

Nothing here to rock the boat. Following the Nonfarm Payrolls, and a series of other disappointments in the US economic data of late, speculators are pricingina rate cut from the Fed for later this year. It will take a major event to rock the apple cart one way or another at this point to shift the markets thinking on Fed policy at this stage of the year.

However, the US Dollar can remain the most favoured of dirty shirts leading into next weeks trade talks between the US and China  during this new phase of easy money cycles throughout the syndicate of global central banks racing to the bottom.  The USD saw a broad decline against G10 currencies, pushing DXY (-0.1%) lower for the fourth consecutive session.