18 Jun 2015
Fed rate hike: Gradual rise good for risk, but not for the dollar – SG
FXStreet (Barcelona) - Kit Juckes of Societe Generale reviews the FOMC Meeting and further shares the outlook for Fed rates and the dollar.
Key Quotes
“The FOMC meeting's effect on financial markets was to boost risk sentiment and reinforce the conviction that the Fed will remain gradual when they start raising rates. Although the ‘dot-path' continues to imply two hikes this year and the Fed remains on track to raise rates in September, the rate that Fed Funds futures imply for the end of 2016 is back down to 1.06%.”
“The idea that the economy is moving in the right direction, strong enough to justify rate hikes but only likely to see these happen at a snail's pace, is good for risk and not good for the dollar.”
“A 1.06% end-2016 Funds rate would represent a rise of 1% in 18 months, much slower than the Fed's dot-path and I just can't see how the market can price in such a slow pace once the first move has happened. Maybe I'm missing something. Markets are now data-dependent."
Key Quotes
“The FOMC meeting's effect on financial markets was to boost risk sentiment and reinforce the conviction that the Fed will remain gradual when they start raising rates. Although the ‘dot-path' continues to imply two hikes this year and the Fed remains on track to raise rates in September, the rate that Fed Funds futures imply for the end of 2016 is back down to 1.06%.”
“The idea that the economy is moving in the right direction, strong enough to justify rate hikes but only likely to see these happen at a snail's pace, is good for risk and not good for the dollar.”
“A 1.06% end-2016 Funds rate would represent a rise of 1% in 18 months, much slower than the Fed's dot-path and I just can't see how the market can price in such a slow pace once the first move has happened. Maybe I'm missing something. Markets are now data-dependent."