16 Jan 2015
Expectations of a delayed Fed rate hike might hinder euro’s fall - Rabobank
FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank, notes that disinflation concerns might delay the Fed rate hike until year-end and likely cause the USD uptrend to slow and hinder euro’s ability to weaken further.
Key Quotes
“At the start of this week it appeared that Draghi’s ability to push down the value of the EUR could have been reaching a stumbling block. Weak US retail sales data fed doubt in the market as to whether the Federal Reserve would be in a position to hike rates in the middle of the year.”
“Since mid-2014, investors have been greedily buying USDs in anticipation of Fed policy tightening and therefore the downtrend in EUR/USD has been facilitated. Disinflation, however, is also likely to impact the US economy and we do not expect a Fed rate hike until the end of this year. On this view, the pace of the USD uptrend could slow.”
“If a change in market expectations over Fed policy is a potential stumbling block in the ability of the EUR to weaken further, the SNB’s decision yesterday offered a whole new lease of life. For now, it is possible that the SNB may still be a moderate EUR buyer in an effort to keep the EUR/CHF exchange rate stabile.”
“If and when the SNB is brave enough to attempt to address the huge EUR holdings in its balance sheet, the EUR could see further downside pressure.“
Key Quotes
“At the start of this week it appeared that Draghi’s ability to push down the value of the EUR could have been reaching a stumbling block. Weak US retail sales data fed doubt in the market as to whether the Federal Reserve would be in a position to hike rates in the middle of the year.”
“Since mid-2014, investors have been greedily buying USDs in anticipation of Fed policy tightening and therefore the downtrend in EUR/USD has been facilitated. Disinflation, however, is also likely to impact the US economy and we do not expect a Fed rate hike until the end of this year. On this view, the pace of the USD uptrend could slow.”
“If a change in market expectations over Fed policy is a potential stumbling block in the ability of the EUR to weaken further, the SNB’s decision yesterday offered a whole new lease of life. For now, it is possible that the SNB may still be a moderate EUR buyer in an effort to keep the EUR/CHF exchange rate stabile.”
“If and when the SNB is brave enough to attempt to address the huge EUR holdings in its balance sheet, the EUR could see further downside pressure.“