EUR/USD, GBP/USD, EUR/GBP flows: Dollar firms out of Warsh; GBP the rates laggard?
Warsh in line with colleagues in characterising policy as unrestrictive and focus on prices, with work to do
Follows an ECB also primed to hike and with a minority their also moving more hawkish
BoE (and GBP?) might be the laggard unless Bailey also changes tact next week
Warsh's comment echo comments from some of his colleagues in characterising as not restrictive, credit markets showing few signs of constraint, and the focus being on prices with no change in underlying trends even with the better summer prints.
Probably of a Sep hike is up to around 50-60% now as there is some consolidation around the above theme from Fed members suggesting the Fed sees the onus of proof on favourable developments to prevent the need for a hike and tending to see the momentum on the growth side as positive.
EUR/USD step moves from the 1.1650~ are balance down to the 1.16~ one, while of course keeping in mind the fact that a Sep ECB hike is pretty much 100% as the Minutes yesterday suggested that some on the ECB were becoming more hawkish and looking for restrictive rather than just neutral policy reset there too. Battle of the hawkish pivots that maybe the BoE is the one currently being left behind on – although we do here from BoE’s Bailey next Friday so that will be interesting for GBP. Sterling could be the current tactical underperformer short term heading into next week, albeit performance their also dependent on the broader risk tone as well. 1.3525-00 is lower support on the GBP/USD side.