Misplaced hope on the Fed

18 May, 2016

The dollar finds itself firmer during the Asia session, with gains most pronounced against the Aussie and Kiwi, those currencies still with positive interest rates and generally higher beta vs. the US dollar. This came about partly on the back of comments from regional Fed Presidents Lockhart and Williams, both of whom were pushing the prospect of two “possibly three” rate moves this year. But don’t forget that they have been consistently wrong over the past year in their predictions for the Fed Funds rate. The prospect of a June move remains weak in my opinion and although the dollar is firmer, it’s difficult to see such gains sustained unless the data starts to consistently push a change in the anticipated rate path. The firmer than expected data has only played a minority role in the recent recovery of the dollar from the lows. The Fed meeting minutes this evening will naturally be in focus later today.

Overnight, we’ve seen firmer than expected GDP data in Japan, but this was tempered by downward revisions to the previous quarter. So in summary, these numbers are not anything to get excited about and the price action on the yen reflected that, standing only modestly weaker after the initial volatility. After yesterday’s weaker CPI data was largely brushed aside in the UK, the focus today is with the labour market numbers today. The skew of expectations in sterling interest rate markets is towards a loosening of interest rates, but this only being a risk priced for later in the year (around 25% chance). As such, it’s hard to see sterling reacting strongly to the numbers given the limited chance of a change in policy this year. The pound continues to hold up well, despite the impending EU referendum next month.


Source link  
Divergence Between Fed and BoJ

The March FOMC meeting will be held for two consecutive days from today. The interest rate decision will be announced at 18:00 GMT on Wednesday 15th March...

Market Volatility Expected Ahead of President Trump's Speech

In a speech that will be watched by millions of viewers in the United States and around the world, the President is expected to speak of his presidency and address pressing issues like his plans for health care, the tax system, the military, and his goals for his administration...

Gold Trades Below Resistance Ahead of the Fed and NFP

We will see the release of the US ISM Manufacturing PMI, and ISM Prices Paid for January, at 15:00 GMT on Wednesday 1st February...


Sterling Struggles Ahead of Theresa May's Speech

Theresa May will make a speech outlining her plans for Brexit tomorrow, Tuesday 17th Jan, before the UK triggers Article 50 to leave the EU...

Dollar Turn-around on Trump's Press Conference

President Elect Trump's first press conference after his victory in the US presidential election, was held yesterday around at 16:00 GMT. It has caused great volatility to the dollar and the markets...

Gold Nears Major Resistance Ahead of Trump’s Press Conference

Gold prices have rebounded since mid-Dec after testing the significant support line at 1120. On the 4 hourly chart, gold bullish momentum has been strengthened since the beginning of this year, helped by the dollar retracement...


Searching for a new narrative

Popcorn at the read today as President elect Trump has a scheduled news conference later in the day (around 16:00 GMT). Markets have become used to listening to him in 140 characters or less over the recent weeks, so a more elongated narrative should be welcome...

The sterling conundrum

Yesterday's early weakness in sterling, on the back of the latest comments from PM May surrounding Brexit, took cable close to key support levels and the resilience seen through most of the post US election period has been unwound...

Selling into USD strength

In summary, Friday US jobs report was pretty much in line with expectations, although the slightly better data on earnings gave some support to the dollar into the end of the week. As a result, the US currency was little changed from Tuesday opening levels...

  


Share: