1 Jul 2015
US data ahead key for Fed rate hike expectations and the USD – SG
FXStreet (Barcelona) - Kit Juckes of Societe Generale, expects a strong NFP and ISM data to harden expectations for a September rate hike, and further shares SG’s forecast for ADP and tomorrow’s nonfarm payrolls.
Key Quotes
“We are entering a crucial period for US economic data, expectations about whether and when the Fed will ever raise rates, and the dollar. Waiting for the Fed to act has felt at times a bit like waiting for England to reach the finals of the football world cup (OK, the Fed has raised rates since 1966, but you get the picture). But if we get a strong ISM, and more importantly a strong NFP report tomorrow, we are going to see market expectations of a hike in September harden significantly.”
“5-year TIIPS yields fell from almost 0.5% to -0.5% during Q1 as falling oil prices and weak data pushed rate hike talk away. Last month's jump in the ISM has taken TIIPS back closer to zero yields but a significant further dollar rally needs yields up at 1%.”
“Our forecasts for today (ADP 204k, ISM 53.2) would show an economy pointing in the right direction. Tomorrow's NFP (+210k, with wage growth slowing a touch to 2.2%) likewise.”
“On our US forecasts, a modest dollar rally is more likely than an outbreak of risk aversion. There's enough scepticism about the Fed policy outlook that it will take a while for sentiment to shift. USD/JPY may edge back up and if equity market feathers are not ruffled, then the high-beta currency bloc won't get hit either. AUD/USD and NZD/USD will remain range-bound for a while longer. Perhaps there is more to go for in being long USD/CAD in the short run.”
Key Quotes
“We are entering a crucial period for US economic data, expectations about whether and when the Fed will ever raise rates, and the dollar. Waiting for the Fed to act has felt at times a bit like waiting for England to reach the finals of the football world cup (OK, the Fed has raised rates since 1966, but you get the picture). But if we get a strong ISM, and more importantly a strong NFP report tomorrow, we are going to see market expectations of a hike in September harden significantly.”
“5-year TIIPS yields fell from almost 0.5% to -0.5% during Q1 as falling oil prices and weak data pushed rate hike talk away. Last month's jump in the ISM has taken TIIPS back closer to zero yields but a significant further dollar rally needs yields up at 1%.”
“Our forecasts for today (ADP 204k, ISM 53.2) would show an economy pointing in the right direction. Tomorrow's NFP (+210k, with wage growth slowing a touch to 2.2%) likewise.”
“On our US forecasts, a modest dollar rally is more likely than an outbreak of risk aversion. There's enough scepticism about the Fed policy outlook that it will take a while for sentiment to shift. USD/JPY may edge back up and if equity market feathers are not ruffled, then the high-beta currency bloc won't get hit either. AUD/USD and NZD/USD will remain range-bound for a while longer. Perhaps there is more to go for in being long USD/CAD in the short run.”