North American Summary and Highlights 17 June

North American session

The FOMC meeting proved worth the wait , with the dollar breaking higher - EUR/USD down 1.1% to 1.1480~, cable back to 1.3260, USD/JPY speed-checked as it runs just through the 160.70~ prior highs, renewing intervention concerns.  

Median dot plots show a hike for this year and remaining higher for longer into next year. That slightly overstates things however as Warsh underscores that those projections were highly uncertain and split. The composition shows that with just less than half seeing the hike this year, 6 seeing more than one hike, but 8 seeing rates unchanged, 1 seeing a cut. Warsh did not give a projection.

Press conference had a lot to digest. Warsh underscores the primacy of uncompromising the price stability mandate, and inflation overshoot in general being a choice and down to monetary policy. At the same time, he notes mixed policy stance (seemingly restrictive for housing, loose for financial markets) also highlighting the balance sheet.

In that respect, lots of consequential taskforces announced into data, inflation drivers, AI and productivity and the balance sheet (including the ample reserve framework). Latter is something market should watch very closely as critical for the Treasury curve. 

Earlier, US May retail sales continued to come in impressively resilient, at 0.9% (mkt 0.5%), 0.8% ex autos, and 0.7% on the control (mkt 0.4%). 

European session

Waiting session in the main, ahead of the key Fed meeting

UK CPI below expectations sticking at 2.8% (mkt 3%), with core 2.6% from 2.5% (mkt 2.7%). Further supports view BoE comfortably on hold through summer and in our view this year. Minor 10 tick blip on EUR/GBP on the release

Riksbank leaves rates unchanged as universally expected. Says probability of a hike later in the year has increased vs March, but forecasts support the main view that policy is ‘well-balanced to leave unchanged’ amid low inflation and somewhat weaker than normal activity.