10 Mar 2015
Fed not bothered by the USD strength – TDS
FXStreet (Barcelona) - Shaun Osborne, Chief FX Strategist at TD Securities, believes that the orderly USD strength will not reflect the Fed from its tightening path, but the dollar strength will likely determine the tightening the Fed introduces.
Key Quotes
“Cleveland Fed President Mester suggested yesterday that it was a question when, rather than if, the Fed starts to raise rates, stating that the economy was strong enough for a rate tightening but that the Fed will be data-dependent when deciding on rate increases.”
“There are no further scheduled speaking engagements for FOMC members now ahead of the March 18th policy meeting, when “patience” may be dropped from the Fed’s policy statement, paving the way for rate increases later this year (Mester suggested she was “comfortable” with H1 rate hike and acknowledged that the stronger USD was weighing on US exports but did not dwell on the issue.”
“We do not think the USD poses a big challenge to the Fed’s tightening intentions at this stage"
“The softness in last week’s US ISM manufacturing export orders index (48.5 in February, from 49.5) has been held up as evidence that the US economy is facing a challenge from the USD advance.”
“ However, the relative strength in the non-manufacturing ISM new export order series (up half a point in February to 53.0) suggests that the (significantly larger) services sector faring relatively well despite the strong USD.”
“We do not think orderly USD strength in and of itself will deflect the Fed from its tightening path though we do acknowledge that strength may ultimately limit how much monetary tightening the Fed introduces in its initial policy normalization steps.”
“Disorderly market conditions and sharp gains in the USD would clearly undercut the Fed’s tightening plans, however.”
Key Quotes
“Cleveland Fed President Mester suggested yesterday that it was a question when, rather than if, the Fed starts to raise rates, stating that the economy was strong enough for a rate tightening but that the Fed will be data-dependent when deciding on rate increases.”
“There are no further scheduled speaking engagements for FOMC members now ahead of the March 18th policy meeting, when “patience” may be dropped from the Fed’s policy statement, paving the way for rate increases later this year (Mester suggested she was “comfortable” with H1 rate hike and acknowledged that the stronger USD was weighing on US exports but did not dwell on the issue.”
“We do not think the USD poses a big challenge to the Fed’s tightening intentions at this stage"
“The softness in last week’s US ISM manufacturing export orders index (48.5 in February, from 49.5) has been held up as evidence that the US economy is facing a challenge from the USD advance.”
“ However, the relative strength in the non-manufacturing ISM new export order series (up half a point in February to 53.0) suggests that the (significantly larger) services sector faring relatively well despite the strong USD.”
“We do not think orderly USD strength in and of itself will deflect the Fed from its tightening path though we do acknowledge that strength may ultimately limit how much monetary tightening the Fed introduces in its initial policy normalization steps.”
“Disorderly market conditions and sharp gains in the USD would clearly undercut the Fed’s tightening plans, however.”