During the European trading session on Thursday, New York Federal Reserve Bank President John Williams delivered hawkish remarks, emphasizing that the central bank faces a significant challenge from rising inflation and expressing confidence in the US economy's resilience and strong demand from Artificial Intelligence (AI) sectors [1][2]. Williams stated that it is 'reasonable to see another rate hike by end of year,' signaling the possibility of further tightening monetary policy [1][2]. He also noted that explicit forward guidance is over, and uncertainty remains regarding the persistence of higher yields [2].
Following Williams' comments, the Silver price (XAG/USD) dropped 1.25% to near $63.60, marking intense selling pressure and retreating from recent highs. The decline was exacerbated by a rally in US Treasury yields, with the 10-year yield reaching 5.14%, its highest level in over 19 years. This surge in yields eroded the appeal of non-yielding assets like Silver [1]. Technical analysis shows XAG/USD trading at $63.79, below the 20-day EMA at $65.15, maintaining a bearish tone, while the Relative Strength Index (RSI) at 46.18 suggests only modest downside momentum [1].
Market reaction to Williams' remarks included a notable rise in the US Dollar Index (DXY), which increased almost 0.1% to near 101.10 from 101.00 [2]. The FXS Fed Sentiment Index slipped by 0.18 points to 148.63, but remains firmly in hawkish territory above the neutral 100 line, indicating continued support for the Dollar [1][2]. According to the CME FedWatch tool, the odds of a Fed rate hike in the remaining two policy meetings this year rose to 55% from 42.3% earlier in the week [1].
ING’s FX Strategist Francesco Pesole commented that the US Dollar's rally, supported by strong US PMIs, higher oil prices, and soft risk sentiment, is starting to look stretched relative to fundamentals. He cautioned that upside surprises in US data could prompt markets to fully price in an October Fed hike, further boosting short-term rates. However, if such risks do not materialize, Pesole expects a correction in DXY toward the 100–100.5 area in the coming weeks. He also flagged USD/JPY intervention risks and noted that without intervention, a return to above 160.0 levels is likely after the Bank of Japan's dovish surprise last week [3].
Fedspeak remains a key focus for investors, with Williams, Barkin, Hammack, and Paulson scheduled to deliver remarks, while the data calendar is quiet [3].
CONCLUSION
Hawkish comments from Fed's Williams have heightened expectations for a potential rate hike, driving US Treasury yields and the Dollar higher while pressuring Silver prices. Market sentiment remains cautious, with analysts noting the Dollar's rally may be stretched and a correction possible if US data does not surprise to the upside. The Fed's inflation concerns and policy outlook continue to shape asset performance and investor expectations.