Fed seeks to get ahead of the curve - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, notes that the Fed speakers have raised the probability of a 15 March rate hike. 

Key Quotes

“They appear to see the next meeting as offering a window of opportunity to get ahead of a three hike agenda this year, allowing the Fed more space to assess conditions through the middle part of the year in an environment of heightened US government policy uncertainty.  Dudley highlighted the sharp pick-up in consumer and small business optimism and easier financial conditions generated by the strong stock market and narrower credit spreads.”

“The weaker USD this year may also allow space for Fed policy tightening.  While there has been little evidence of the ‘Trump bump’ flowing through to real activity, Dudley still sees the economy operating somewhat above trend and progress towards the Fed’s dual mandate.  The Fed’s Williams added that the Fed is close to achieving its dual mandate.”

“In recent months, the USD has responded negatively to USA policy uncertainty and growing doubts over the capacity of the Trump administration to deliver on its initial promise. In fact, the USD appears to have significantly underperformed its improved yield advantage over the last year.  We continue to see a topsy-turvy FX market this year, but Fed policy tightening may help boost the USD in the near term.”