Dovish Comments from Fed Waller / Higher USTS / FFR is now pricing in 1 full rate cut by May 2024

"I think a life properly lived is just learn, learn, learn all the time"

US Treasury Curve bull steepened overnight on dovish comments from an otherwise hawkish FOMC member Christopher J. Waller, DXY plummeted and Gold prices after being capped at $ 2000 since October finally broke out higher to trade a high of $ 2043.

In his speech titled "something appears to be giving, and it's the pace of the economy", Mr. Waller commented that economic growth has moderated and that is more in keeping with progress on lowering inflation.

Fed Reserve Board Member Waller said " I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2 percent. That said, there is still significant uncertainty about the pace of future activity, and so I cannot say for sure whether the FOMC has done enough to achieve price stability. But the recent loosening of financial conditions is a reminder that many factors can affect these conditions and that policymakers must be careful about relying on such tightening to do our job." 

Fed Governor Bowman noted that she would support raising rates again if data show progress on inflation has stalled or is insufficient to bring inflation back down to 2 percent

The Fed Fund Pricing moved lower further. 

On the domestic front, USDINR continued to be range bound between the 83.30 - 83.50 while forward points were lower with the Oct contract dipping to as low as 1.51% on Exporter Forward Selling and equities continued to climb higher. MSCI Rebalancing flows est at $ 1.50 bn of inflows coupled with a lower DXY lend a preference for selling USDINR. While the Forward trade has not performed , the increasing rate differential supports the paying view.