17 Mar 2015
Countdown for awkward Fed tightening cycle begins - JPMorgan
FXStreet (Bali) - As JP Morgan notes, this week’s FOMC meeting should begin a countdown to the most awkward Fed tightening cycle in at least 30 years.
Key Quotes
"This week’s FOMC meeting should begin a countdown to the most awkward Fed tightening cycle in at least 30 years. Unemployment is indeed falling rapidly, yet inflation is lower, growth weaker and the dollar much stronger than ahead of the 1987, 1994, 1999 and 2004 hikes."
"The dollar, however, is undeterred by the possibility of Fed limits. The index has reached levels and is exhibiting momentum similar to the mid-80s and late-90s. Those eras were bull markets to some but bubbles to others."
"By the usual standards by which history judges financial market cycles, the dollar appears to be in the early stages of morphing from a compelling long-term investment into a questionable one unless the Fed can deliver 3.5% cash rates. But like every bubble, the catalysts for reversal seem like 2016 events, either because the Fed pauses after its initial hikes, the ECB/BoJ talk of tapering or EM growth turns up broadly. Stay long but selective."
Key Quotes
"This week’s FOMC meeting should begin a countdown to the most awkward Fed tightening cycle in at least 30 years. Unemployment is indeed falling rapidly, yet inflation is lower, growth weaker and the dollar much stronger than ahead of the 1987, 1994, 1999 and 2004 hikes."
"The dollar, however, is undeterred by the possibility of Fed limits. The index has reached levels and is exhibiting momentum similar to the mid-80s and late-90s. Those eras were bull markets to some but bubbles to others."
"By the usual standards by which history judges financial market cycles, the dollar appears to be in the early stages of morphing from a compelling long-term investment into a questionable one unless the Fed can deliver 3.5% cash rates. But like every bubble, the catalysts for reversal seem like 2016 events, either because the Fed pauses after its initial hikes, the ECB/BoJ talk of tapering or EM growth turns up broadly. Stay long but selective."