24.05.202209:49 Forex Analysis & Reviews: Pausing rate hikes in September might make sense, Bostic said

Yesterday, FRB of Atlanta President Raphael Bostic said the Fed could potentially pause interest-rate increases in September, following expected half-point rate increases over the next two months. "I think a pause in September might make sense. After you get through the summer, and we think about where we are in terms of policy, I think a lot of it will depend on the ground dynamics that we are starting to see. I'm an optimist and I'm assuming inflation will have started to definitively move. My motto is observe and adapt," Bostic told the Rotary Club of Atlanta.

Mr. Bostic supports Chairman Powell's plan to raise rates by 50 basis points in June and July but says that an upside surprise on prices could call for more aggressive action.

Inflation in the US is now at a 40-year high, three times above the regulator's 2% target. "If inflation starts moving in a different direction than it is right now, I'd have to be open to us moving more aggressively. I do want to make it clear that nothing is off the table. As we go through the months, we will see how it plays out," Bostic noted. Many Fed policymakers suggest that inflation would be in the range of 3% by the end of the year, most likely referring to core inflation.

Bostic also commented on the recent developments in the US stock market, including a sharp drop in stocks last week. In his view, all this was in line with the Fed's goal to tighten monetary policy. Since the Fed began raising interest rates in March, there have been a few signs of an economic slowdown. Bostic said he expects to see the funds rate ending at a range of 2 to 2.5% at the end of the year.

To extend the bullish rally, euro buyers should go above 1.0700, with targets at 1.0740 and 1.0780. This is where bulls might encounter strong resistance, especially since the instrument is overbought in lower time frames. If pressure on the euro returns, bulls will try to protect the 1.0650 level. If they fail, bears will push the price to the 1.0600 and 1.0560 lows.

Speaking of the pound, bears have recently managed to protect 1.2540, which allows them to build the lower limit of the ascending channel. In the short term, bulls are likely to go above 1.2600. In case of a breakout, the pair will skyrocket to 1.2640 and 1.2690. Pressure on the pound will increase if the price breaks through 1.2540, with targets at 1.2500 and 1.2450. A more distant target stands at the 1.2390 support level. Support could be updated if weak fundamentals come in during the week.