10 Apr 2014
USD weakness to be temporary - Societe Generale
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale, expects the USD to gather traction when the Fed raise rates.
Key Quotes
"As the US economy normalises, so Fed policy needs to normalise too, and financial markets need to get used to the idea that rates will be moving higher. The adjustment in longer-term rate expectations that was triggered by introducing the idea of tapering QE last spring may have caused a certain amount of volatility but as ‘forward guidance' goes, it was far more successful than anything we saw in 1993."
"Letting markets get used to the idea that the Fed could indeed raise rates a little earlier than the base case assumption of H2 2015, is no bad idea. Nor is the notion that they could raise rates a bit faster."
"After all, a Taylor Rule guide to where rates should be, is already well above 1%. The very dovish tone to the Minutes will undermine the dollar, boost equities, boost emerging markets assets, drag credit spreads even tighter and make markets a more dangerous pace."
"Eventually, the Fed will need to hike rates. The more dovish air they pump into markets now, the bigger the reaction when they do hike."
Key Quotes
"As the US economy normalises, so Fed policy needs to normalise too, and financial markets need to get used to the idea that rates will be moving higher. The adjustment in longer-term rate expectations that was triggered by introducing the idea of tapering QE last spring may have caused a certain amount of volatility but as ‘forward guidance' goes, it was far more successful than anything we saw in 1993."
"Letting markets get used to the idea that the Fed could indeed raise rates a little earlier than the base case assumption of H2 2015, is no bad idea. Nor is the notion that they could raise rates a bit faster."
"After all, a Taylor Rule guide to where rates should be, is already well above 1%. The very dovish tone to the Minutes will undermine the dollar, boost equities, boost emerging markets assets, drag credit spreads even tighter and make markets a more dangerous pace."
"Eventually, the Fed will need to hike rates. The more dovish air they pump into markets now, the bigger the reaction when they do hike."