{"id":60590,"date":"2022-07-14T01:29:34","date_gmt":"2022-07-14T08:29:34","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=60590"},"modified":"2022-07-14T01:32:30","modified_gmt":"2022-07-14T08:32:30","slug":"hot-inflation-read-accelerated-the-timeline-for-peak-fed-rates","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2022\/07\/14\/hot-inflation-read-accelerated-the-timeline-for-peak-fed-rates\/","title":{"rendered":"Hot Inflation Read Accelerated the Timeline for Peak Fed Rates"},"content":{"rendered":"\n<p>The landscape of inflation and monetary policy continues to change fast. <a href=\"https:\/\/inflationwatch.wordpress.com\/2022\/07\/13\/so-much-for-peak-inflation\/\">The June inflation numbers disappointed expectations once again for peak inflation<\/a>. A surprise <a href=\"https:\/\/www.bankofcanada.ca\/2022\/07\/fad-press-release-2022-07-13\/\" target=\"_blank\" rel=\"noreferrer noopener\">1% point rate hike by the Bank of Canada<\/a> combined with this hot inflation accelerated the timeline for peak interest rates from the Federal Reserve. Instead of a 75 basis point hike for the July meeting, Fed Fund Futures are bracing for a Bank of Canada style 100 basis point move. This acceleration in turn pushed the <a href=\"https:\/\/drduru.com\/onetwentytwo\/2022\/07\/10\/why-wall-street-wants-a-recession\/\">peaking of 3.5% &#8211; 3.75% at the December, 2022 meeting<\/a>, to a 3.75% &#8211; 4.0% peak rate range at the December meeting. However, instead of maintaining peak rates for 5 meetings before the first rate cut, the Fed Fund Futures have now priced in just two meetings at the peak before the first rate cut at the March, 2023 meeting. A second rate cut comes in July, 2023. <\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full\"><a href=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_Fed-Fund-Futures-Meeting-Probabilities.jpg\"><img loading=\"lazy\" decoding=\"async\" width=\"860\" height=\"388\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_Fed-Fund-Futures-Meeting-Probabilities.jpg\" alt=\"The meeting probabilities indicate peak Fed rates from  December, 2022 to February, 2023 and then two rate cuts by July, 2023.\" class=\"wp-image-60593\" title=\"Meeting probabilities for Fed Fund Futures\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_Fed-Fund-Futures-Meeting-Probabilities.jpg 860w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_Fed-Fund-Futures-Meeting-Probabilities-768x346.jpg 768w\" sizes=\"auto, (max-width: 860px) 100vw, 860px\" \/><\/a><figcaption><strong><em>The meeting probabilities indicate peak Fed rates from  December, 2022 to February, 2023 and then two rate cuts by July, 2023. (Source: <a href=\"https:\/\/www.cmegroup.com\/trading\/interest-rates\/countdown-to-fomc.html\" target=\"_blank\" rel=\"noreferrer noopener\">CME FedWatch Tool<\/a>)<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>The U.S. Dollar Index<\/strong><\/h2>\n\n\n\n<p>Given the shifting sands, this latest snapshot will not deliver the final word on the path of monetary policy. Yet, this is the map the market gets for now. Accordingly, the U.S. dollar index (DXY) gained fresh strength and momentum even as interest rates declined, presumably in response to rising fears of a recession. The monthly chart below shows how extended the U.S. dollar is, but also how much more room the dollar could go before hitting the next spot of resistance from the highs of 2001-2002.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full\"><a href=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_DXY-US-Dollar-Index.png\"><img loading=\"lazy\" decoding=\"async\" width=\"1566\" height=\"850\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_DXY-US-Dollar-Index.png\" alt=\"The U.S. Dollar Index (DXY) has been soaring on a monthly basis for over a year.\" class=\"wp-image-60592\" title=\"U.S. Dollar Index (DXY)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_DXY-US-Dollar-Index.png 1566w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_DXY-US-Dollar-Index-768x417.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_DXY-US-Dollar-Index-1536x834.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_DXY-US-Dollar-Index-1320x716.png 1320w\" sizes=\"auto, (max-width: 1566px) 100vw, 1566px\" \/><\/a><figcaption><strong><em>The U.S. Dollar Index (DXY) has been soaring on a monthly basis for over a year.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n<p>I pared back my long U.S. dollar positions (long USD\/JPY &#8211; which I think has a chance to get to 150 before the Bank of Japan finally acts). I plan to refresh on the next dip ahead of the Fed&#8217;s July meeting. I will go into the meeting dollar neutral and perhaps with no dollar positions period. The market&#8217;s response to the Fed could go in any direction depending on a multitude of possible policy stands from the Fed.<\/p>\n\n\n\n<p>I am also keeping a close eye on gold. The SPDR Gold Trust (GLD) managed to gain 0.5% with a bullish engulfing print from the intraday low despite a fade from the intraday high. This nascent bottoming move needs a higher close for confirmation.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full\"><a href=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_GLD-SPDR-Gold-Trust.png\"><img loading=\"lazy\" decoding=\"async\" width=\"1566\" height=\"850\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_GLD-SPDR-Gold-Trust.png\" alt=\"The SPDR Gold Trust (GLD) gained 0.5% and printed a potential bottom with a bullish engulfing pattern.\" class=\"wp-image-60595\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_GLD-SPDR-Gold-Trust.png 1566w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_GLD-SPDR-Gold-Trust-768x417.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_GLD-SPDR-Gold-Trust-1536x834.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2022\/07\/220713_GLD-SPDR-Gold-Trust-1320x716.png 1320w\" sizes=\"auto, (max-width: 1566px) 100vw, 1566px\" \/><\/a><figcaption><strong><em>The SPDR Gold Trust (GLD) gained 0.5% and printed a potential bottom with a bullish engulfing pattern.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n<p>While financial markets can look forward to rate cuts sooner than before, the path to those rate cuts just got a little more painful. As a result, <a href=\"https:\/\/drduru.com\/onetwentytwo\/2022\/07\/11\/a-time-to-shift-into-neutral-the-market-breadth\/\">the ceiling on the stock market<\/a> feels firmer than before. <\/p>\n\n\n\n<p>Be careful out there!<\/p>\n\n\n\n<p>Full disclosure: long GLD<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The landscape of inflation and monetary policy continues to change fast. The June inflation numbers disappointed expectations once again for peak inflation. A surprise 1% point rate hike by the Bank of Canada combined with this hot inflation accelerated the timeline for peak interest rates from the Federal Reserve. Instead of a 75 basis point &#8230; <a title=\"Hot Inflation Read Accelerated the Timeline for Peak Fed Rates\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2022\/07\/14\/hot-inflation-read-accelerated-the-timeline-for-peak-fed-rates\/\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1303,199,58,20,90,62],"tags":[2049,2225,200,1598,115,499,1838],"class_list":["post-60590","post","type-post","status-publish","format-standard","hentry","category-bottom","category-commodities","category-federal-reserve","category-forex","category-inflation","category-technical-analysis","tag-dxy","tag-fed-fund-futures","tag-gld","tag-inflation","tag-monetary-policy","tag-spdr-gold-trust","tag-u-s-dollar-index"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Hot Inflation Read Accelerated the Timeline for Peak Fed Rates<\/title>\n<meta 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