Following a series of mixed US inflation data releases, officials of the Federal Reserve provided several speeches. Specifically, a speech by the San Francisco Fed President Mary Daly caught attention. She stated that the central bank still had a lot to do to control inflation, even though July data showed a more modest price increase than expected.
"The CPI data came in largely as expected, and that is good news," Daly said. Notably, she does not vote on monetary policy this year. "It's also consistent with what we believe will be happening, which is that inflation will gradually make its way down," she added. "But it is not a data point that says victory is ours. There's still more work to do."
In short, according to the US Bureau of Labor Statistics, the core consumer price index, which excludes prices of food and energy, increased by 0.2% in July. This represents the lowest consecutive growth in over two years. The overall consumer price index also increased by 0.2% in July and by 3.2% compared to the previous year.
Notably, at the end of the July meeting, the committee decided to raise the federal funds rate to 5.5%, the highest level in 22 years. The Fed officials' average estimate published in June indicated two more rate hikes this year, with the first occurring last month.
The central bank's focus remains on key economic data. A lot of statistical data is expected for August, which will be issued before the monetary policy meeting in early September. Currently, investors are not expecting a rate increase at this meeting.
This week, there were also several speeches by Fed officials. They had different opinions on whether the central bank should stop raising rates or maintain its current strict course. Philadelphia Fed President Patrick Harker stated on Tuesday that policymakers might halt interest rate increases if there were no economic surprises. On the other hand, on Monday, Governor Michelle Bowman expressed the opinion that the Fed might need to further raise rates to fully restore price stability.
Regarding today's technical picture for EUR/USD, the pressure on the euro remains the same. To regain control, buyers should keep the price above 1.1010. This would pave the way to 1.1060. From there, the price may climb to 1.1110. However, it would be quite difficult without support from major traders. If the pair drops, I expect significant action from major buyers only around 1.0970. If they fail to be active, it would be wise to wait for a low of 1.0930 or consider long positions from 1.0900.
Meanwhile, demand for the pound sterling is mounting. The pound sterling will rise only after bulls gain control over the 1.2705 level. Regaining this range will boost hopes for recovery to 1.2740 and 1.2780, after which we can talk about a surge to around 1.2810. If the pair falls, bears will attempt to take control over 1.2660. If they succeed, a breakout of this range will hurt bulls' positions and push GBP/USD to a low of 1.2620, with the potential to drop further to 1.2590.
