Global Macro Commentary | North America: July 6: Fed Guidance in Focus

Research evidence excerpt

Global Macro Commentary | North America: July 6: Fed Guidance in Focus

UpdateMNDOIS yield fell 5bp in a bull-flattening move amid a INR146bn (planned: INR

750bn) 3-day VRR auction.

• LatAm FX traded mixed, with CLP the weakest performer, depreciating

~0.80% despite copper extending its rally for a third consecutive session.

Meanwhile, BRL outperformed, appreciating ~0.67%. Rates in the region also

diverged, with the Brazilian DI curve outperforming as Jan 31 DIs rallied ~9bp.

CLP CAM also outperformed, with the 1y rallying ~7bp as easing

expectations increased. On the other hand, COP IBR underperformed, with

the 2y selling off ~15bp.

• In CEEMEA, the Bank of Israel cut its benchmark rate to 3.5% from 3.75%,

matching estimates, and signaled further easing ahead as inflation is

expected to keep slowing. Hungary priced a €3 billion two-part eurobond,

its first international issuance since the change in prime minister in April,

with the long 5-year tranche tightening to mid-swaps+80 from initial

guidance of +115 area on books above €4.3 billion. The South African rand

traded near its strongest level against the dollar in three weeks (USD/ZAR: -

0.2%), supported by growing carry appeal, with traders pricing a greater than

50% probability of a quarter-point SARB rate hike on July 23.

Central Bank Monitor

Developed Markets

• In the US, Fed Chair Kevin Warsh defended the continued use of

forward guidance as a monetary policy tool, describing it as "more art

than science," while acknowledging it can hinder policymaking if

applied too rigidly — a position that pushes back somewhat against

Fed Chair Kevin Warsh's preference for less communication. On

inflation, Waller stated that risks have "completely flipped" over the

past year — from a shaky labor market dominating concerns to