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15 Dec 2014
Expect FOMC to continue on its path for a mid-2015 rate hike – SG
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Research at Societe Generale, expects FOMC to continue on its path for a rate hike in mid-2015, supported by the recent improvement in US economic data.
Key Quotes
“The FX market - taking its cue from the Treasury market - is far from confident that the FOMC will hike rates in mid-2015. And so, removing/changing the ‘considerable time' language that is interpreted by market participants as signalling there will be no rate hike for at least 6 months, will probably support the dollar and support FX volatility.”
“Given the steady improvement in economic data recently, it makes sense for the FOMC - at the very least - to give itself the option of continuing on the current path towards a mid-2015 hike and we expect that to happen.”
“Last week's CFTC positioning data sum up the state of the market. A big dollar long, but the biggest moves on the week are reductions in that position. It is mid-December and bets are coming off the table, with EUR/USD and USD/JPY both chopping around, consolidating and finding new ranges to trade in rather than just reflecting the dollar uptrend.”
“Looking at the positioning, the biggest surprise (to me), anyway) is that the short in MXN is so big relative to the short in CAD. If last week's widening in high yield spreads continues in the US and if the markets start to focus on the size of debt-financed investment in the energy sector in Canada, we could see CAD weakness accelerate from here.”
Key Quotes
“The FX market - taking its cue from the Treasury market - is far from confident that the FOMC will hike rates in mid-2015. And so, removing/changing the ‘considerable time' language that is interpreted by market participants as signalling there will be no rate hike for at least 6 months, will probably support the dollar and support FX volatility.”
“Given the steady improvement in economic data recently, it makes sense for the FOMC - at the very least - to give itself the option of continuing on the current path towards a mid-2015 hike and we expect that to happen.”
“Last week's CFTC positioning data sum up the state of the market. A big dollar long, but the biggest moves on the week are reductions in that position. It is mid-December and bets are coming off the table, with EUR/USD and USD/JPY both chopping around, consolidating and finding new ranges to trade in rather than just reflecting the dollar uptrend.”
“Looking at the positioning, the biggest surprise (to me), anyway) is that the short in MXN is so big relative to the short in CAD. If last week's widening in high yield spreads continues in the US and if the markets start to focus on the size of debt-financed investment in the energy sector in Canada, we could see CAD weakness accelerate from here.”