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26 Apr 2016
FOMC Preview: Unlikely to rock the boat - ING
Rob Carnell, Chief International Economist at ING, suggests that as we approach this FOMC meeting (27 April) with a rare sense of certainty as in our view there is no chance of a rate hike.
Key Quotes
“There is even limited scope for the Fed to move markets with text changes. A wary Fed will sustain risk sentiment, yet scope for another dovish shot to the USD is unlikely given the lighter positioning. USD weakness is starting to look overdone and a window of strength may be nearing.
This month’s event is a non-press briefing meeting and will not provide any additional materials (FOMC projections, dot diagram, etc). In effect, the text of the statement is all the Fed can tweak and markets may find that they have little to take their cue from.
The format of the statement is typically fixed. The first paragraph covers the state of the economy and this is where we see some room for adjustment. Given the mixed news, we see little scope for any material change to the outlook for economic activity or inflation in the statement.
A window for USD strength is nearing, but US data holds the key. With financial conditions having eased greatly and spec markets on aggregate net short USD for the first time since Sep 2014, any USD fallout from a cautious Fed statement will likely be short-lived. USD weakness is starting to look overdone and any rebound in US data could well serve as a conviction signal for USD upside against the low-yielders in a robust risk environment. Look to fade USD weakness against EUR and JPY.”
Key Quotes
“There is even limited scope for the Fed to move markets with text changes. A wary Fed will sustain risk sentiment, yet scope for another dovish shot to the USD is unlikely given the lighter positioning. USD weakness is starting to look overdone and a window of strength may be nearing.
This month’s event is a non-press briefing meeting and will not provide any additional materials (FOMC projections, dot diagram, etc). In effect, the text of the statement is all the Fed can tweak and markets may find that they have little to take their cue from.
The format of the statement is typically fixed. The first paragraph covers the state of the economy and this is where we see some room for adjustment. Given the mixed news, we see little scope for any material change to the outlook for economic activity or inflation in the statement.
A window for USD strength is nearing, but US data holds the key. With financial conditions having eased greatly and spec markets on aggregate net short USD for the first time since Sep 2014, any USD fallout from a cautious Fed statement will likely be short-lived. USD weakness is starting to look overdone and any rebound in US data could well serve as a conviction signal for USD upside against the low-yielders in a robust risk environment. Look to fade USD weakness against EUR and JPY.”