• Primary question today is not how much further to hike rates, but how large the pass-through of what is already in the pipe
  • In current tightening cycle, the lag in policy transmission may be at the upper end of 1 – 2 year range. I expect today that we will be at the terminal rate not later than September
  • The acceleration in rate increases from 50 basis points to 25 basis points was wise and cautious
  • We need to monitor the pass-through of our substantial and exceptional rapid past hikes
  • How long we maintained the rates high is now more important than the precise terminal level
  • We will remain a data-driven looking at the meeting by meeting at the outlook for inflation and strength of monetary policy transmission
  • We can hike or pause at the next 3 meetings

Meanwhile, ECB's Lane says that

  • The markets believe that inflation will come back to 2% in foreseeable future

The EURUSD is back to trading above and below the 100-day moving average at 1.0808. The 50% midpoint of the move up from the March 2023 low to the high reached on April 26 comes in at 1.0805. The current price is trading at 1.0807 right at the 2 key levels. The market is unsure of the next shove.

NOTE. The low to the high trading range is at 36 pips. That is well below the 76 PIP average trading range over the last month of trading. There is room to roam on a break with momentum. So far the "momentum is lacking, but the buyers had the last shot with the price making new highs for the day. That shot missed.

EURUSD
EURUSD trades above and below its 100 day MA/50% retracement