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26.06.202612:15 Analisis Forex & Kajian: New York Fed President John Williams strongly backs Fed's hawkish stance

Yesterday, New York Fed President John Williams strongly supported the Fed's hawkish stance, saying that the current level of rates has a good chance of returning inflation to target. "Given the elevated level of inflation, it is imperative that we restore it to our 2% longer-run goal on a sustained basis," his prepared remarks said. "The current stance of monetary policy is well positioned to do that."

Williams explicitly described inflation as unquestionably high and listed three sources: tariffs, an energy shock from the war with Iran, and an investment boom around artificial intelligence. Importantly, Williams is not one of the most extreme hawks on the committee but an influential centrist, effectively the third most significant voice in Fed leadership. When a figure of his standing says rates should remain high, the market reads it as reflecting a consensus rather than a radical position. His remarks fit the recent chorus, in which Goolsbee spoke of inflation moving in the wrong direction and Hammack alluded to a possible need to act.

However, the comments had no discernible impact on the dollar. The dollar is most likely trading the future rather than the present. The effect of tariffs has largely already manifested, and energy prices have fallen. This is a direct reference to the oil collapse after the Iranian agreement, which I described in detail. Now many policymakers are projecting inflation to fall to 3.5% by year-end, then to slow further and reach the 2% goal by 2028. A waning tariff effect, slowing housing inflation, and stabilizing energy prices should gradually ease price pressures, reducing the dollar's appeal. The key caveat is that the energy scenario will work only with a relatively swift resolution of the Middle East conflict. So far, a memorandum has been signed only for 60 days, and nobody knows what will follow.

Still, Williams' hawkish tone poses a risk for markets. Traders now expect tightening by September, and the words of an influential centrist reinforce that outlook. Recall that last week the Fed left rates unchanged, but nearly half of committee members are forecasting at least one hike this year.

The current technical picture for EUR/USD suggests that buyers need to think about taking the 1.1390 level. Only that will allow a target test of 1.1415. From there a climb to 1.1450 is possible, but achieving that without support from major players would be difficult. On the downside, I expect serious buying only around 1.1350. If buyers are absent there, it would be prudent to wait for a new low at 1.1320 or to open long positions from 1.1280.

As for GBP/USD, buyers of pound sterling need to take the nearest resistance at 1.3216. Only that will allow a move toward 1.3244, above which further progress will be difficult. The farther target is the 1.3270 area. On a decline, bears will attempt to seize control of 1.3175. If they succeed, a break of the range would inflict a serious blow to bulls and push GBP/USD toward a low of 1.3140 with the prospect of extending to 1.3097.

* Analisis pasaran yang disiarkan di sini adalah bertujuan untuk meningkatkan kesedaran anda, tetapi tidak untuk memberi arahan untuk membuat perdagangan.

Jakub Novak,
Analytical expert of InstaSpot
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