Summary:

• Brainard says may be prudent to raise rates more gradually than median forecast
• Also suggests she is ready to start shrinking the balance sheet
• USD drifting lower as US participants return

As US traders return from their bank holiday weekend celebrating labour day, the US dollar has come under a little selling pressure. Whilst the weakness is only relatively small at present, it could well be a cause for concern amongst USD bulls who were hoping that the move lower was behind them after last week saw the USD index hit its lowest level since January 2015. 

 

 The USD index fell to a 2 and a half year low last week and is seeing some selling so far today. Source: xStation

The softening seen in recent trade could well be linked to comments form Fed member Brainard who has been speaking in New York on the economic outlook and monetary policy. The following are selected comments which are of particular interest:

• May be prudent to raise rates more gradually than median forecast
• Fed should make clear it is comfortable with pushing inflation modestly above target for a time
• Inflation well short of objective

Whilst these comments seem to be dovish, it should be remember that Brainard has traditionally been view as an arch-dove and therefore some of the potency of her comments are diminished. Nonetheless there has been a notable drop in the past hour in the greenback with the USDJPY  falling to its lowest level of the week just above the 109 handle. What appeared to be a possible double bottom around 108.40 could now be in for a retest. 

 The USDJPY could be set for a retest of the double bottom seen last week at 108.40. Source: xStation