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19 Dec 2013
Flash: Tapering without tightening - HSBC
FXstreet.com (Córdoba) - The FOMC said it would start to reduce its pace of quantitative easing (QE) asset purchases by USD10bn, to USD75bn, in January. According to the HSBC analyst team, further cuts of USD10bn at upcoming FOMC meetings can be expected.
Key Quotes
"The Fed is clearly committed to a highly accommodative policy stance, but it is changing the 'mix' of policy tools, with a greater reliance on low short-term rates, strengthened with forward guidance, and a reduced reliance on asset purchases".
"The Fed plans to exit QE gradually and keep the front end of the yield curve anchored for longer than previously anticipated".
"It is not clear whether the early taper or new initiatives on forward guidance will dominate the mood, but the Fed’s previous attempts to keep rate hike expectations in check have proven successful".
"As a result, the market is not chasing the knee-jerk USD rally. Instead, we believe it makes sense to sell any spike in the USD against the likes of the RUB, INR or MXN, where the initial adverse announcement reaction might be most potent".
"Similarly, in G10, we would look for a reversal of any EUR-USD, GBP-USD, or AUD-NZD dip, for example. The Fed may have tapered early, but the broader tone should not be a gamechanger for the FX market".
Key Quotes
"The Fed is clearly committed to a highly accommodative policy stance, but it is changing the 'mix' of policy tools, with a greater reliance on low short-term rates, strengthened with forward guidance, and a reduced reliance on asset purchases".
"The Fed plans to exit QE gradually and keep the front end of the yield curve anchored for longer than previously anticipated".
"It is not clear whether the early taper or new initiatives on forward guidance will dominate the mood, but the Fed’s previous attempts to keep rate hike expectations in check have proven successful".
"As a result, the market is not chasing the knee-jerk USD rally. Instead, we believe it makes sense to sell any spike in the USD against the likes of the RUB, INR or MXN, where the initial adverse announcement reaction might be most potent".
"Similarly, in G10, we would look for a reversal of any EUR-USD, GBP-USD, or AUD-NZD dip, for example. The Fed may have tapered early, but the broader tone should not be a gamechanger for the FX market".