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4 May 2016
USD reversal supported by the comments from Fed officials – Deutsche Bank
Research Team at Deutsche Bank, suggests that some attributed yesterday’s reversal in the US Dollar off the lows to the comments from Fed officials yesterday.
Key Quotes
“Both San Francisco Fed President Williams and Atlanta Fed President Lockhart stuck to the Fed script by not ruling out the possibility of a move next month. Lockhart said specifically that ‘I would put more probability on it being a real option’ and the ‘communication of committee participants and members between now and mid-June obviously should try to prepare the markets for at least a realistic range of possibilities’.
Meanwhile, Williams went as far as to say that should inflation continue to rise towards the Fed’s target and growth rebounds towards his 2% target for the year, then ‘it would be appropriate’ to ‘go that next step’ in hiking in June.
In fact we’ve heard from Lockhart again overnight and while the bulk of his comments reinforced those made during the day, he also added that the uncertainty stemming from the Brexit referendum ‘has some potential to loom large as we approach the June meeting’.
June is all of a sudden looking like a big month for markets and it’s worth highlighting that in the time between June 15th and June 26th, we’ll have the FOMC meeting (on the 15th), BoJ meeting (on the 16th), BoE meeting (on the 16th), UK EU referendum (on the 23rd) and a possible Spain election on the 26th. In the background we'll also have the ECB starting their corporate bond purchases, with their success likely to be a big factor in credit markets in June and beyond.”
Key Quotes
“Both San Francisco Fed President Williams and Atlanta Fed President Lockhart stuck to the Fed script by not ruling out the possibility of a move next month. Lockhart said specifically that ‘I would put more probability on it being a real option’ and the ‘communication of committee participants and members between now and mid-June obviously should try to prepare the markets for at least a realistic range of possibilities’.
Meanwhile, Williams went as far as to say that should inflation continue to rise towards the Fed’s target and growth rebounds towards his 2% target for the year, then ‘it would be appropriate’ to ‘go that next step’ in hiking in June.
In fact we’ve heard from Lockhart again overnight and while the bulk of his comments reinforced those made during the day, he also added that the uncertainty stemming from the Brexit referendum ‘has some potential to loom large as we approach the June meeting’.
June is all of a sudden looking like a big month for markets and it’s worth highlighting that in the time between June 15th and June 26th, we’ll have the FOMC meeting (on the 15th), BoJ meeting (on the 16th), BoE meeting (on the 16th), UK EU referendum (on the 23rd) and a possible Spain election on the 26th. In the background we'll also have the ECB starting their corporate bond purchases, with their success likely to be a big factor in credit markets in June and beyond.”