27 Apr 2015
Fed’s lift-off likely in December – Rabobank
FXStreet (Edinburgh) - Jane Foley, Senior FX Strategist at Rabobank, sees the Fed starting its hiking cycle in December.
Key Quotes
“Coincident with the improvement in Eurozone economic prospects, market expectations regarding the first rate hike from the Fed have been moving back”.
“A slew of weak US economic data for Q1 has been compounded by soft initial jobless claims data, a hefty -11.4% m/m drop in March new home sales and a disappointed breakdown to the March durable goods report”.
While bad weather and port strikes have been associated with the poorer economic performance, US corporate earnings reports have clarified that USD strength is having a detrimental impact on economic activity”.
“Thomson/Reuters stated this week that of the first 169 S&P500 companies that reported Q1 results, 71% beat earnings estimates. Notably, however, this has reportedly been achieved with the support of share-buy-backs, cost cutting and other measures”.
“Together these results indicate that dollar strength has already tightened US monetary conditions and these disappointments on revenues and sales are set to impact expectations of the performance of US corporate activity in Q2 and beyond”.
“Our house view that the Fed may keep policy on hold until December 2015 is no longer so far out of kilter with the market consensus for the first policy move which has slipped from the June FOMC to September”.
Key Quotes
“Coincident with the improvement in Eurozone economic prospects, market expectations regarding the first rate hike from the Fed have been moving back”.
“A slew of weak US economic data for Q1 has been compounded by soft initial jobless claims data, a hefty -11.4% m/m drop in March new home sales and a disappointed breakdown to the March durable goods report”.
While bad weather and port strikes have been associated with the poorer economic performance, US corporate earnings reports have clarified that USD strength is having a detrimental impact on economic activity”.
“Thomson/Reuters stated this week that of the first 169 S&P500 companies that reported Q1 results, 71% beat earnings estimates. Notably, however, this has reportedly been achieved with the support of share-buy-backs, cost cutting and other measures”.
“Together these results indicate that dollar strength has already tightened US monetary conditions and these disappointments on revenues and sales are set to impact expectations of the performance of US corporate activity in Q2 and beyond”.
“Our house view that the Fed may keep policy on hold until December 2015 is no longer so far out of kilter with the market consensus for the first policy move which has slipped from the June FOMC to September”.