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  
Markets recover after the drop

The markets decline on investors' fears that trade conflicts will drag on and slow down demand, and this dynamic coincided with breaking through important...

Markets pressured by Huawei problem

Alphabet and some other American IT companies have suspended business with Huawei, which is one of the first examples of major consequences for...

The climate is changing rapidly

British people need to fly less, drive electric cars, eat little meat and turn their home thermostats down to 19 degrees Celsius (66 Fahrenheit) in order to rein...


Chinese stocks saw their worst week

Chinese stocks have taken investors on a ride this year. Shanghai and Shenzhen have been the best performing global markets this year, with the Shanghai...

Risk-sensitive currencies on the rise

Stock markets show growth after the release of strong data for China and Japan as their respective PMIs were better than expected which supported...

Trump again puts pressure on OPEC

President Donald Trump told OPEC on Thursday that its members should start pumping more oil, marking his second warning to the producer group this year...


Turkish lira fell by 5% before elections

The Turkish lira dropped by as much as 5 percent against the dollar on Thursday morning, as the country gears up for elections this weekend. The greenback...

May won't ask for a long Brexit delay

Prime Minister Theresa May won't ask the European Union for a 'long' delay to the Brexit deadline, her office said, after pro-Brexit ministers objected...

Demand for safe assets grows

Markets remain under moderate pressure, despite the Fed comments. Powell's semi-annual speech in Congress reinforced expectations that the US Central Bank...

  


Share it on:   or