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18 Sep 2015
A dovish and dithering Fed inspires little confidence - Socgen
FXStreet (Guatemala) - Kit Juckes, economist at Societe Generale explained first take on the Fed staying put.
Key Quotes:
"The Fed's decision to leave rates on hold was not a surprise to a market positioned that way but the tone of the statement and the new lowered ‘dot-path' (median sees one hike this year, 4 in 2016, 5 in 2017 and 3 in 2018 for a 3.375% Funds rate peak) have dragged Treasury yields down. That is not dollar-supportive.
However, any bounce in risk assets will be short-lived. A dovish and dithering Fed inspires little confidence.
Once EM-inspired reduction in dollar long positions is over, we look for AUD, NZD and CAD to weaken again, with NZD the most vulnerable. And the biggest winner could still be the yen if the risk mood sours."
Key Quotes:
"The Fed's decision to leave rates on hold was not a surprise to a market positioned that way but the tone of the statement and the new lowered ‘dot-path' (median sees one hike this year, 4 in 2016, 5 in 2017 and 3 in 2018 for a 3.375% Funds rate peak) have dragged Treasury yields down. That is not dollar-supportive.
However, any bounce in risk assets will be short-lived. A dovish and dithering Fed inspires little confidence.
Once EM-inspired reduction in dollar long positions is over, we look for AUD, NZD and CAD to weaken again, with NZD the most vulnerable. And the biggest winner could still be the yen if the risk mood sours."