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16 Sep 2013
Flash: What FOMC needs to prevent more USD sell-off? - RBS
FXstreet.com (Barcelona) - After Mr. Summers withdrawal as potential FOMC Chairman, the FOMC meeting will be even more intense this week, anticipates Greg Giibbs, FX Strategist at RBS, who mentions the need for $20bn taper, no change in guidance and at least no lowering in the 2015 rate expectations and at least a 100bp rise in the central tendency for rate expectations in 2016, as elements to prevent a further slide in the USD.
Key Quotes
"Yellen, the favourite candidate now, would be regarded on the far dovish end of the scale, typically advocating for easier policy than her colleagues. Furthermore, she was also a key lieutenant of Former Chairman Greenspan, who is widely considered to have kept policy too easy in the face of an historic run up in household debt and house prices fuelled by excessive easing in credit conditions. Yellen has her finger-prints all over the bubble that fuelled the financial crisis after from 2007 onwards."
"Yellen may be very capable, but she will carry much baggage into the job that will make it hard and leave her vulnerable to getting rolled over by a sceptical market. Presuming now that Yellen does get the job, perversely she may realise that she has to go in with a hawkish bent to counteract public perceptions."
"It may turn out that the Fed will see the USD slide as reflecting credibility concerns and embolden it to go with a larger degree of tapering in QE this week. Uncertainty has just been raised, but most of it shifts towards the perception that the post-Bernanke Fed regime will be just as dovish if not more so. Only a $20bn tapering and Fed presentation that emphasises the purchases are likely to be ended by mid-next year will stabilise the USD this week."
Key Quotes
"Yellen, the favourite candidate now, would be regarded on the far dovish end of the scale, typically advocating for easier policy than her colleagues. Furthermore, she was also a key lieutenant of Former Chairman Greenspan, who is widely considered to have kept policy too easy in the face of an historic run up in household debt and house prices fuelled by excessive easing in credit conditions. Yellen has her finger-prints all over the bubble that fuelled the financial crisis after from 2007 onwards."
"Yellen may be very capable, but she will carry much baggage into the job that will make it hard and leave her vulnerable to getting rolled over by a sceptical market. Presuming now that Yellen does get the job, perversely she may realise that she has to go in with a hawkish bent to counteract public perceptions."
"It may turn out that the Fed will see the USD slide as reflecting credibility concerns and embolden it to go with a larger degree of tapering in QE this week. Uncertainty has just been raised, but most of it shifts towards the perception that the post-Bernanke Fed regime will be just as dovish if not more so. Only a $20bn tapering and Fed presentation that emphasises the purchases are likely to be ended by mid-next year will stabilise the USD this week."