Chicago Fed President Austan Goolsbee warned that inflation remains well above target and the economy is overheating, fueling a broad US Dollar rally that saw the currency gain 0.59% against the Australian Dollar.
Fed's Goolsbee said inflation is 'well above target' and that Tuesday's hot CPI 'wasn't a one-off', warning the economy is overheating. That reduces expectations of near-term rate cuts, which supports the dollar. The table shows the dollar up today against all majors, strongest versus the Australian Dollar (+0.59%).
The hawkish message from Goolsbee — inflation well above target and no one-off — trims the odds of Fed easing, which weighs on the euro against the dollar. The dollar was up 0.26% against the euro today as it strengthened across the board.
The aussie was the biggest loser as the dollar firmed after Goolsbee's comments, falling 0.59% — the largest move in the table. A hawkish Fed leaning against rate cuts because of hot inflation and an overheating economy puts further downside pressure on the high-beta aussie.
Chicago Fed President Austan Goolsbee stated that recent hot inflation data was not a one-off event, signaling that the economy is overheating. His comments weighed on market sentiment, driving the US Dollar higher across the board as investors recalibrated expectations for future rate cuts. The Greenback saw its strongest performance against the Australian Dollar, climbing 0.59% during the session.
A Fed official saying inflation is well above target and the hot CPI wasn't a one-off makes quick rate cuts less likely, and higher US rates tend to make the dollar more attractive.
If sticky US inflation keeps the Fed from cutting rates, the dollar tends to firm and the euro tends to slip, as seen in today's 0.26% dollar gain against the euro.
The aussie is sensitive to shifts in Fed rate expectations, and Goolsbee's warning that hot inflation wasn't a one-off lifted the dollar, sending AUD down 0.59% against it today.