Fed's Daly: Not leaning one way or the other on July interest rate decision- RTRS

San Francisco Federal Reserve Bank President Mary Daly has crossed the wries with the following comments:

• She is not leaning one way or the other on July interest rate decision.
• Too early to tell if economy needs additional stimulus to get to above-trend growth.
• US economy needs above-trend growth to boost inflation.
• 'Real-side' data has come in a little bit stronger than expected.
• She sees no clouds looming on consumer spending, healthy labour market.
• Her business contacts feel uncertain, but have not switched to 'storm cloud' plan.
• Sees potpourri of headwinds, including trade, mood, uncertainty, global slowdown.
• Jury still out on whether headwinds are strong enough to knock economy to below-trend growth.
• Business behaviour is leading indicator on where economy is heading.
• Asked if rates will be lower by year's end, says she will learn a lot in next two months.

FX implications

None at all. The market is comfortably pricing in a rate cut - But the question is whether it will be a one and done scenario and how deep it will be this time around. Earlier today, we had yet further evidence that the Fed is only likely to cut by a 25 basis point reduction in July (rather than 50bp) which should be sufficient as a first insurance move to offset the negative effect of trade wars. US consumer spending moved ahead solidly in June, with Retail Sales posting a stronger than expected 0.4% increase.