Back
19 Mar 2014
Flash: FOMC would dictate price action today - Societe Generale
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale, expects the Fed to keep its tapering process.
Key Quotes
"The 'big event' is the FOMC and i thnkthe history matters heere..The average ‘real' Fed Funds rate during Paul Volcker's 8-year tenure as Fed Chairman was 3.75%. The average rate in the Greenspan, Bernanke and Yellen eras is just 1.1%."
"It's a gross over-simplification but the dollar rose during the Volcker era and has weakened since, while the US has seen debt levels increase and the value of assets relative to other prices do likewise. You would have to be pretty stubborn not to conclude that the post-Volcker Fed has a dovish bias, and tends to do more for the S&P than the dollar."
"Today's FOMC meeting will see the snail-like turn in Fed policy continue, with a further reduction in the pace of bond buying, probably by another $10bn. The FOMC will also probably phase-out the explicit 6.5% threshold for considering tighter policy, replacing it with something fuzzier and more qualitative But most of all, we are likely to hear more soothing words and are unlikely to bring forward the timing of the first rate hike from H2 2015. And yet, as Chart 1 shows, the recent acceleration in US wage growth from 1.3% in December 2012 to 2.5% last month, is significant and if that trend continues, the conclusion is that the Fed really ought to tighten sooner or if not, then faster once they do start."
Key Quotes
"The 'big event' is the FOMC and i thnkthe history matters heere..The average ‘real' Fed Funds rate during Paul Volcker's 8-year tenure as Fed Chairman was 3.75%. The average rate in the Greenspan, Bernanke and Yellen eras is just 1.1%."
"It's a gross over-simplification but the dollar rose during the Volcker era and has weakened since, while the US has seen debt levels increase and the value of assets relative to other prices do likewise. You would have to be pretty stubborn not to conclude that the post-Volcker Fed has a dovish bias, and tends to do more for the S&P than the dollar."
"Today's FOMC meeting will see the snail-like turn in Fed policy continue, with a further reduction in the pace of bond buying, probably by another $10bn. The FOMC will also probably phase-out the explicit 6.5% threshold for considering tighter policy, replacing it with something fuzzier and more qualitative But most of all, we are likely to hear more soothing words and are unlikely to bring forward the timing of the first rate hike from H2 2015. And yet, as Chart 1 shows, the recent acceleration in US wage growth from 1.3% in December 2012 to 2.5% last month, is significant and if that trend continues, the conclusion is that the Fed really ought to tighten sooner or if not, then faster once they do start."