Fed Governor Paulson signals further gradual rate hikes are appropriate to address persistent inflation, keeping the US Dollar Index supported near 102.25 as the Fed maintains a restrictive policy bias.
Philadelphia Fed Governor Paulson delivered a distinctly hawkish speech (FXS Speechtracker 8.1/10 vs 7.6 average), backing further 'gradual' rate hikes with underlying inflation stuck between 2.5% and 3% and high inflation risks. This supports additional tightening and keeps upside pressure on the Dollar. However, the unchanged FXS Fed Sentiment Index (145.28, 0.00 move) suggests the restrictive stance was largely priced in, limiting the incremental move.
A hawkish Fed speech supporting further rate hikes keeps upside pressure on the Dollar versus lower-yielding peers, which weighs on EUR/USD as a risk-sensitive, lower-yielding currency pair. With the hawkish stance largely priced in, the downside push is moderate rather than sharp.
Philadelphia Fed Governor Anna Paulson signaled a hawkish stance on November 11, advocating for further gradual rate hikes to combat underlying inflation stuck between 2.5% and 3%. With the economy remaining stronger than expected, Paulson emphasized that the Fed has more work to do, keeping the US Dollar Index supported near 102.25 as markets digest the need for a somewhat restrictive policy.
She backed further gradual rate hikes and said the Fed has more work to do on inflation, with underlying inflation between 2.5% and 3%. Higher expected rates typically support the Dollar.
Limited, since the broader Fed sentiment index was unchanged on the day, meaning markets had largely priced in a restrictive stance; the Dollar is consolidating gains near 102.25 on the DXY.
It is a headwind: her support for further rate hikes supports the Dollar against lower-yielding peers like the euro, though much of the hawkish stance was already priced in.