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24 Feb 2015
Fed’s rate hike decision might become entirely data dependent – RBS
FXStreet (Barcelona) - Brian Dangerfield of RBS, comments that with expectations strong ahead of Yellen’s testimony that ‘patience’ might be dropped, Fed’s rate hike decision might become entirely data dependent.
Key Quotes
“The USD held up well last week after a dovish set of minutes. The reason perhaps is that the market thinks the testimony this week by Yellen may reflect recent more positive news, in particularly the much stronger than expected labour and wages data in January. It may also reflect recent gains in asset markets and improved data trends in Europe and Japan, suggesting bearish market sentiment in January was over-done.”
“Many are anticipating that Yellen may hint that the ‘patient’ language in the Fed statement may be dropped making the next rate decision entirely data dependent.”
“The market, we believe, is coming to terms with a Fed rate hike mid-year and some follow-up hikes in Q3 and Q4.”
“As such, we are not convinced we will see a big negative reaction in riskier global assets if the Fed does firm up the message that a hike is coming as soon as mid-year. Nevertheless, it may tend to support the USD and we wonder if we might see a clearer shift towards cross bets in favour of some higher yielding and high beta currencies against EUR and JPY, if only to generate some diversification away from long USD positions.”
Key Quotes
“The USD held up well last week after a dovish set of minutes. The reason perhaps is that the market thinks the testimony this week by Yellen may reflect recent more positive news, in particularly the much stronger than expected labour and wages data in January. It may also reflect recent gains in asset markets and improved data trends in Europe and Japan, suggesting bearish market sentiment in January was over-done.”
“Many are anticipating that Yellen may hint that the ‘patient’ language in the Fed statement may be dropped making the next rate decision entirely data dependent.”
“The market, we believe, is coming to terms with a Fed rate hike mid-year and some follow-up hikes in Q3 and Q4.”
“As such, we are not convinced we will see a big negative reaction in riskier global assets if the Fed does firm up the message that a hike is coming as soon as mid-year. Nevertheless, it may tend to support the USD and we wonder if we might see a clearer shift towards cross bets in favour of some higher yielding and high beta currencies against EUR and JPY, if only to generate some diversification away from long USD positions.”