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18 Sep 2015
FX implications: USD on a back foot, but not forever - BTMU
FXStreet (Guatemala) - Analysts at Bank of Tokyo mitsubishi noted that the dollar weakened across the board post-FOMC reflecting the increased risks to already low inflation from external developments causing the Fed to delay hiking.
Key Quotes:
"The lowering of the median dots raises risks around a hike this year. But, the FOMC’s confidence in the outlook (particularly in the labor market) underpins hikes later this year, and therefore, the policy divergence theme we expect to support the USD.
"With a 30% chance priced into the meeting, we would expect some near-term pressure on the USD—particularly versus commodity-linked currencies where USD positioning is largest—as the timing of the first hike is now less certain. However, with any significant USD weakness likely to incent other central banks (like the ECB) to ease further and given our view for a December Fed hike, we see USD downside as limited here."
Key Quotes:
"The lowering of the median dots raises risks around a hike this year. But, the FOMC’s confidence in the outlook (particularly in the labor market) underpins hikes later this year, and therefore, the policy divergence theme we expect to support the USD.
"With a 30% chance priced into the meeting, we would expect some near-term pressure on the USD—particularly versus commodity-linked currencies where USD positioning is largest—as the timing of the first hike is now less certain. However, with any significant USD weakness likely to incent other central banks (like the ECB) to ease further and given our view for a December Fed hike, we see USD downside as limited here."