Fed Waller: December inflation data was very good

• December inflation data was very good
• looking at 12 month indicators it does not look like we’ve made a lot of progress on inflation
• if numbers continue like this is reasonable to think rate cuts could come in H1
• 6 of 8 months have been on target and reasonable to think that trend will continue
• if there is a surprise like last year Fed will need to stay on hold, optimistic disinflation will continue
• Looks like inflation is getting back to trend
• I don’t think March can be completely ruled out
• Could see record sooner than the market expects
• Three or four cuts could be possible this year if the data cooperates (the market is pricing in around 39 basis points cuts this year)
• The strong jobs report was a makeup from weaker earlier reads
• When look at all the indicators, the jobs market is solid, it is not booming
• Tariffs may not lead to higher inflation; does not see them as having a huge inflation effect.
• I think inflation is going to to continue tocome in toward the target
• I may be more optimistic than my colleagues at the Fed

Wallers comments were more dovish. Yield s have dipped with the 10 year now trading at 4.659% that’s up 0.6 basis points.. The high yield today reached 4.694%.

The two-year is is trading at 4.266%. That is down from 4.316%.

Looking at the major US stock indices:

• S&P index is down -4.05 points or -0.07% at 5945.91. The index was down -15.47 points at session lows
• NASDAQ index is down -22 points or -0.11% at 19488. At session lows, the index is down -74.99 points

The EURUSD has moved up to retest its 200-hour moving average at 1.0319. Getting – and staying above – the 200 hour moving average would be more bullish.

The USDJPY has moved back outside of the Red Box (see chart below) for the third day. Will the third time be the charm? The 38.2% retracement and 200 bar moving average on the 4-hour chart are the next targets at 154.93 and 154.816.

This article was written by Greg Michalowski at www.forexlive.com.