28 Apr 2015
FOMC meeting: Stable policy and a dovish Fed expected – SG
FXStreet (Barcelona) - Kit Juckes of Societe Generale, expects the FOMC statement to be dovish, and further comments on the shift in FX market towards yields.
Key Quotes
“The Fed's two-day meeting starts today but we can contain our excitement. A dovish statement and no policy moves are universally expected. In the meantime, Case-Shiller house price and Richmond Fed manufacturing data won't add much to the debate, while yesterday's dip in the services PMI to 57.4 from 59.2 supports the notion that the US economy is growing, but not as fast as it was or as some would like it to.”
“The US is the only G10 market where 2-year rates are higher now than they were six months ago (14bp higher) and that in turn is reflected in the dollar having gone up against all the rest of G10FX. But if we look at the last three months, US rates are up only 6bp, and we've had bigger rises in NOK, GBP and CAD. At the risk of stating the obvious, the dollar, up between 8% (vs CHF) and 24% (vs SEK) over the last year, has been re-priced on monetary policy divergence and won't make further headway until that trend resumes.”
“In the meantime, the FX market is once again gravitating towards yield - and the four currencies with the highest rates in G10 are indeed the ones which have done best this week. It sounds like a recipe for lower volatility and for money to leach towards emerging markets (again) until the US rate outlook changes again.”
Key Quotes
“The Fed's two-day meeting starts today but we can contain our excitement. A dovish statement and no policy moves are universally expected. In the meantime, Case-Shiller house price and Richmond Fed manufacturing data won't add much to the debate, while yesterday's dip in the services PMI to 57.4 from 59.2 supports the notion that the US economy is growing, but not as fast as it was or as some would like it to.”
“The US is the only G10 market where 2-year rates are higher now than they were six months ago (14bp higher) and that in turn is reflected in the dollar having gone up against all the rest of G10FX. But if we look at the last three months, US rates are up only 6bp, and we've had bigger rises in NOK, GBP and CAD. At the risk of stating the obvious, the dollar, up between 8% (vs CHF) and 24% (vs SEK) over the last year, has been re-priced on monetary policy divergence and won't make further headway until that trend resumes.”
“In the meantime, the FX market is once again gravitating towards yield - and the four currencies with the highest rates in G10 are indeed the ones which have done best this week. It sounds like a recipe for lower volatility and for money to leach towards emerging markets (again) until the US rate outlook changes again.”