27 Apr 2016
FOMC meeting should heat things up – Deutsche Bank
Research Team at Deutsche Bank, suggests that the markets have been feeling the chill so far this week but the conclusion of the FOMC meeting this evening should heat things up.
Key Quotes
“With no press conference, all the focus will be on the tone of the associated statement. The Fed will want to leave the door open for a June hike but it's hard to imagine that they'll dramatically change market pricing for it.
The futures contracts have nudged up to pricing a 22% probability of a June hike from as low as 14% mid-way through this month. How much this changes will likely hinge on what extent the Fed continues to acknowledge concerns about global growth and risks abroad.
US data has been mixed of late. After getting back close to neutral at the start of April, economic surprise indices have trended steadily lower into negative territory as the month has passed. On the positive side the weaker US Dollar should give the Fed some confidence.
Since the March Fed meeting, the Dollar index has weakened just over 2%. That’s partly helped to support a near $8/bbl gain for WTI and 4% rally for the S&P 500 to YTD highs. We think much of the rebound in markets since early February has been due to the Fed's about turn and re-found dovishness. This leaves them trapped in our opinion.”
Key Quotes
“With no press conference, all the focus will be on the tone of the associated statement. The Fed will want to leave the door open for a June hike but it's hard to imagine that they'll dramatically change market pricing for it.
The futures contracts have nudged up to pricing a 22% probability of a June hike from as low as 14% mid-way through this month. How much this changes will likely hinge on what extent the Fed continues to acknowledge concerns about global growth and risks abroad.
US data has been mixed of late. After getting back close to neutral at the start of April, economic surprise indices have trended steadily lower into negative territory as the month has passed. On the positive side the weaker US Dollar should give the Fed some confidence.
Since the March Fed meeting, the Dollar index has weakened just over 2%. That’s partly helped to support a near $8/bbl gain for WTI and 4% rally for the S&P 500 to YTD highs. We think much of the rebound in markets since early February has been due to the Fed's about turn and re-found dovishness. This leaves them trapped in our opinion.”