New York Fed President, William Dudley believes that a September Fed rate hike is likely. What are his arguments and how did it impact the market?
16 August AtoZForex — The US dollar declined further after the release of today’s US CPI. The data met the expectations of the market’s forecast and came in flat at 0.0%. Immediately after the reading, the US Dollar Index (DXY) hit the low at 94.43. However, the spike lower was short lived, as sharp reversal was seen in DXY after the recent comments of New York Fed President William Dudley.
Traders have paid attention to the comments of NY Fed president William Dudley, as he has always been a voting member of the Fed policy committee. Another reason why William Dudley’s views are closely watched, deals with the fact that he is considered to be a close ally of Fed chair Janet Yellen.
What are the reasons for a September rate hike?
Shortly after the US data were released, the Fed President William Dudley told Fox Business News that a September Fed rate hike “is possible” and stated:
“I don’t think my views have changed very much. I think we’re looking for growth in the second half of the year that’ll be stronger than the first half. We’re edging closer towards the point in time where it’ll be appropriate to raise interest rates further.”
Bond yield rise on Fed William Dudley’s comments
Moving along, Fed William Dudley mentioned that the bond market is one area of which he is concerned about: “I would argue, the one area which looks a little bit stretched to me is the bond market.” William Dudley pointed out further, that the central banks’ massive quantitative easing has been one of the factors for driving up the US bonds prices.
Due to Fed William Dudley’s comments about the possible September Fed rate hike and the situation of the bond market, the US Treasuries moved. The expectations for a September Fed rate hike made investors sell shorter-dated US Treasuries. Hence, the yields on two-year notes US2YT=RR, rose and touched a near three-week high.
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