The first Federal Reserve official this year stated: it is difficult to determine the impact of Trump's policies, and MMF policy will depend on economic data.
Federal Reserve Board member Kugler stated, "There is a view that we can slow down and adopt a more gradual approach" while observing data to determine whether stubborn inflationary pressures will begin to ease again. She also mentioned that the current economic situation is good, and although the job market has cooled somewhat, it remains resilient with the unemployment rate at historically low levels.
Overview of views: Federal Reserve governors are cautious about inflation, and the AI boom seems far from over.
Richmond Federal Reserve Bank President Tom Barkin stated that he believes the current interest rates set by the Federal Reserve remain sufficiently restrictive to bring down the inflation rate by 2025. Committee member Kugler hopes to see evidence that shows inflation is back on a downward path. UBS Group mentioned that stocks of companies related to AI have been driving the market higher for years, and this trend may continue. JPMorgan suggested increasing exposure to the yen to guard against the risk of an unexpected slowdown in the USA economy. Federal Reserve's Barkin: Optimistic outlook for 2025, inflation will decrease according to Barkin on Friday in Maryland.
New York foreign exchange market: Bloomberg's USD recorded a weekly increase, with the Canadian dollar underperforming Other G-10 currencies.
The Bloomberg USD Index slightly declined on Friday, following a report indicating an increase in a measure of manufacturing activity for the second consecutive month in December. The Canadian dollar lagged behind other G10 currencies, while Sweden performed the best. The Bloomberg USD spot exchange rates index fell by 0.2%, with a cumulative increase of 0.7% for the week, marking the fifth consecutive week of gains. The index rose by 8% in 2024, partly due to market speculation that Trump's policies will stimulate inflation and economic growth. Win Thin, Global Head of Market Strategy at Brown Brothers Harriman, noted that the manufacturing sector appears to be in good shape.
JPMorgan recommends increasing exposure to the yen to hedge against risks in the USA economy.
JPMorgan suggests increasing yen exposure to guard against the risk of unexpected slowdowns in the USA economy. Although JPMorgan's baseline expectation is that the dollar will strengthen further in the first quarter of 2025, "optimism regarding the USA is already well reflected in the prices, even though the fundamental details have softened," wrote strategists such as Meera Chandan in a report on Friday. "This is an evolving risk factor that needs attention for our bullish view on the dollar, but going long on yen appears more attractive; increase yen exposure." The strategists stated, "One way to guard against the risk of unexpected slowdown in USA data is to..."
Federal Reserve's Barkin: The outlook for 2025 is optimistic, and inflation in the USA is expected to continue to decline.
① Richmond Federal Reserve President Barkin stated that the current level of interest rates set by the Federal Reserve is sufficient to lower inflation by 2025; ② Barkin believes that although inflation in the USA has not reached the target, there is no longer a need for stringent restrictions like before; ③ Barkin anticipates that economic growth will face more upward risks, and the labor market is more likely to shift towards hiring rather than layoffs.
In December 2023, the USA's ISM Manufacturing PMI reached a nine-month high, with a surge in prices and new Order Index, while employment remains sluggish.
In December, the ISM manufacturing Index in the USA was 49.3, better than the expected 48.2, compared to 48.4 in November. The new Order Index was 52.5, reaching a new high since January 2024, while November was 50.4. The employment Index was 45.3, compared to the previous value of 48.1. The prices paid Index was 52.5, while November was 50.3. Analysts stated that this is a relatively robust manufacturing report.
