The Fed set an even tougher tone for markets yesterday. Four Fed officials — Mary Daly, Beth Hammack, Austan Goolsbee, and Jeffrey Schmid — spoke about persistent inflation, with San Francisco Fed President Mary Daly showing the most notable shift. "My bias is that further tightening will be needed," she said at an event at the Stanford Institute for Economic Policy.

Her main argument is that price pressure has moved beyond sectors directly tied to tariffs and oil, and an increasing number of firms say that they will pass higher costs on to consumers. Until recently, Daly described policy as being in a good place and saw no reason to change interest rates because of higher yields. Now, her current stance is materially firmer. She does not vote on rates this year but reiterated she supported both the September hike, the first since 2023, and October's pause, when the range stayed at 3.75–4.00%, with two votes in favor of a hike.

Hammack, speaking in Columbus, said that policy needs to move to a restrictive stance and left the door open to more forceful action if the Fed falls behind in fighting inflation, although she does not see that need now. Her tone has been consistent: on October 12, she warned that getting inflation back to 2% requires restrictive policy. She voted for a hike on October 28, and on November 5, she preferred more frequent, smaller moves.

Goolsbee warned in an interview that AI infrastructure buildouts could overheat demand, pushing the Fed into a zone where bringing inflation down is even harder. Last week, he raised the alarm over overheating driven by data centers, and on November 10, he called the CPI print "worrisome."

Daly is notably more cautious than her Chicago counterpart about the impact of AI. She accepts that capacity buildouts push prices higher, but so far, the effect on overall inflation is modest because cost increases are small and have not spilled across many sectors. In her view, other factors are currently driving headline inflation rather than AI-related goods. She remains optimistic about potential productivity gains, though timing is uncertain.

The broad nature of price pressure is reflected in October's CPI. Headline inflation rose by 0.4% m/m (Bloomberg consensus 0.3%), and core inflation added 0.3% m/m (consensus 0.2%). This was the third straight month of prints above expectations. The ranks supporting a December hike are expanding. Waller signaled a 50-bp option, and Logan said earlier in the week that winter could require more frequent hikes, whereas she previously discussed at least two 25-bp steps. Markets adjusted quickly: futures now price in 25-bp hikes at the next three meetings — December, January, and March.

In my view, the base case remains a 25-bp hike on December 9, while the risk of a 50-bp move persists if data continues to surprise to the upside. Today's US PPI will be the first test, and I believe strong figures would cement expectations for three straight hikes and increase pressure on EUR/USD and GBP/USD. Only materially weaker prints on prices and the labor market can stop the dollar's advance — and we do not see those signs yet.

As for EUR/USD technicals, buyers need to gain control of 1.1070. Only that would open a test of 1.1105. From there, a run to 1.1130 becomes possible, but doing so without support from large players will be difficult. In case of a pullback, I expect significant buying only around 1.1035. If that level lacks bids, it would be prudent to wait for a dip to a fresh low at 1.1004 or to open long positions at 1.0975.

The GBP/USD technical analysis shows that pound buyers must overcome the nearest resistance level of 1.3245. That would allow a move toward 1.3275, above which further gains would be challenging. The next upside target is around 1.3300. On a decline, bears will try to seize 1.3215. If they succeed, a range break would inflict serious damage on bulls, pushing the British pound to 1.3180, with the prospect of extending weakness to 1.3160.