18 Dec 2014
Dollar mixed as markets digest FOMC and SNB – BBH
FXStreet (Barcelona) - USD trades mixed today as markets digest the FOMC rhetoric and SNB’s shift to negative rates, with AUD and NOK outperforming, and EUR and CHF underperforming.
Key Quotes
“Markets are digesting the FOMC outcome. Our heuristic approach to the Federal Reserve is that the policy thrust emanates from the core leadership, which presently is Yellen, Fischer and Dudley. What follows from that simple observation is that the FOMC statement is the clearest expression of policy. The forecasts (dot plot) and the minutes from the meeting dilute and distort that policy signal.”
“This is especially relevant now. There is a rotation of regional presidents with voting authority next year. Moreover, all three of the dissenting presidents (three of the five) have reportedly signaled plans to leave the Fed.”
“We continue to see the most likely scenario for the first rate hike in June. We acknowledge some risk that the hike is delivered in September instead. Barring a significant surprise, the choice between the two meetings will be data-driven.”
“The Swiss National Bank announced a negative 25 bp interest rate on sight deposits and lowered the 3-month Libor range to -0.75% to 0.25%. Although SNB President Jordan revealed that it was inflows from Russia that compelled it to intervene in recent days, the fact of the matter is that the negative rate goes into effect the same day as the ECB's next meeting, January 22.”
“The announcement took the market by surprise. The SNB had given no clues at last week's quarterly review. The euro immediately shot up to CHF1.21 from just above the floor of CHF1.20. Nearly as quickly the gains were retraced, leaving the euro near CHF1.2040.”
Key Quotes
“Markets are digesting the FOMC outcome. Our heuristic approach to the Federal Reserve is that the policy thrust emanates from the core leadership, which presently is Yellen, Fischer and Dudley. What follows from that simple observation is that the FOMC statement is the clearest expression of policy. The forecasts (dot plot) and the minutes from the meeting dilute and distort that policy signal.”
“This is especially relevant now. There is a rotation of regional presidents with voting authority next year. Moreover, all three of the dissenting presidents (three of the five) have reportedly signaled plans to leave the Fed.”
“We continue to see the most likely scenario for the first rate hike in June. We acknowledge some risk that the hike is delivered in September instead. Barring a significant surprise, the choice between the two meetings will be data-driven.”
“The Swiss National Bank announced a negative 25 bp interest rate on sight deposits and lowered the 3-month Libor range to -0.75% to 0.25%. Although SNB President Jordan revealed that it was inflows from Russia that compelled it to intervene in recent days, the fact of the matter is that the negative rate goes into effect the same day as the ECB's next meeting, January 22.”
“The announcement took the market by surprise. The SNB had given no clues at last week's quarterly review. The euro immediately shot up to CHF1.21 from just above the floor of CHF1.20. Nearly as quickly the gains were retraced, leaving the euro near CHF1.2040.”