18 Dec 2014
FOMC... good news for USD Bulls – Investec
FXStreet (Barcelona) - The Investec Research Team notes that FOMC rate decision lived up to the market expectations dragging US indices higher and sparking a USD buying spree, making the bulls happy.
Key Quotes
“The big risk event of the week, the FOMC rate decision, more than lived up to expectation. Equity markets surged after Yellen’s comments with the Dow 288 points up and the FTSE up 43 points and the statement sparked a wave of USD buying too. GBPUSD plummeted 2 cents in a very short space of time to move from the 1.57s to the 1.55s. Similarly the Dollar gained ground against the Euro with EURUSD now trading in the 1.23s, having been in the 1.25s at the start of the day.”
“Drilling into the detail - Last night's FOMC statement pointed to the Fed's normalisation of interest rates getting underway in mid-15 with the Fed dropping the 'considerable time' phrase and instead saying it can be 'patient' in judging when to start raising rates, to reassure markets that rate rises are not imminent quite yet. The committee stated that the new phrase was consistent with the old one. Indeed, in efforts to reassure, Yellen went as far as to say a rate rise would not be likely to take place at the next couple of meetings (taking us to April earliest) in the press conference.”
“The FOMC continued to recognise the solid jobs market recovery over recent months and looks intent on looking through the impact of lower oil prices on inflation. The FOMC also forecast a slower pace of rate rises in 2015 and 2016 in its ‘dot plot’. In light of the above, the Investec Economics team maintain their June 15 forecast for the first hike after last night's statement.“
Key Quotes
“The big risk event of the week, the FOMC rate decision, more than lived up to expectation. Equity markets surged after Yellen’s comments with the Dow 288 points up and the FTSE up 43 points and the statement sparked a wave of USD buying too. GBPUSD plummeted 2 cents in a very short space of time to move from the 1.57s to the 1.55s. Similarly the Dollar gained ground against the Euro with EURUSD now trading in the 1.23s, having been in the 1.25s at the start of the day.”
“Drilling into the detail - Last night's FOMC statement pointed to the Fed's normalisation of interest rates getting underway in mid-15 with the Fed dropping the 'considerable time' phrase and instead saying it can be 'patient' in judging when to start raising rates, to reassure markets that rate rises are not imminent quite yet. The committee stated that the new phrase was consistent with the old one. Indeed, in efforts to reassure, Yellen went as far as to say a rate rise would not be likely to take place at the next couple of meetings (taking us to April earliest) in the press conference.”
“The FOMC continued to recognise the solid jobs market recovery over recent months and looks intent on looking through the impact of lower oil prices on inflation. The FOMC also forecast a slower pace of rate rises in 2015 and 2016 in its ‘dot plot’. In light of the above, the Investec Economics team maintain their June 15 forecast for the first hike after last night's statement.“