10 Apr 2014
USD extends the bearishness - BTMU
FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, remarks the USD decline after the FOMC minutes.
Key Quotes
"The US dollar has weakened modestly in the Asian trading session following the release overnight of the more dovish than expected FOMC minutes. The dollar index has now almost fully reversed its gains recorded initially following the last FOMC meeting on the 19th March."
"Similarly short-term US yields have also fallen back to levels recorded prior to the last FOMC meeting undermining the US dollar. The release of the minutes from 19th March FOMC meeting were released overnight and contained no major surprises although have been interpreted by investors as more dovish than expected."
"The minutes reiterated that the shift in the “dot plot” of Fed funds rate projections should not be construed as a “move by the committee to a less accommodative reaction function” and “several participants noted that the increase in the median projection overstated the shift in the projections”. The median projections for the Fed funds rate were raised by 0.25 percentage point to 1.00% by the end of 2015 and 0.50 percentage point to 2.25% by the end of 2016."
"However, the higher Fed funds rate projections still highlight that on balance the FOMC is becoming more confident over the outlook for the US economy with QE set to end by October and the first Fed funds rate hike expected in the 2H 2015. Investors have also interpreted the discussion in the minutes over the amount of slack in the labour market as dovish."
"Participants generally agreed that the labour market had continued to improve, although considerable slack remains. There was a range of views over how much slack remained with several participants noting high levels of long-term unemployment and part-time workers, and low nominal wage growth. The recent pull back in short-term US yields and US dollar following the NFP report and FOMC minutes appears overdone with the US economy set to strengthen further during 2014."
Key Quotes
"The US dollar has weakened modestly in the Asian trading session following the release overnight of the more dovish than expected FOMC minutes. The dollar index has now almost fully reversed its gains recorded initially following the last FOMC meeting on the 19th March."
"Similarly short-term US yields have also fallen back to levels recorded prior to the last FOMC meeting undermining the US dollar. The release of the minutes from 19th March FOMC meeting were released overnight and contained no major surprises although have been interpreted by investors as more dovish than expected."
"The minutes reiterated that the shift in the “dot plot” of Fed funds rate projections should not be construed as a “move by the committee to a less accommodative reaction function” and “several participants noted that the increase in the median projection overstated the shift in the projections”. The median projections for the Fed funds rate were raised by 0.25 percentage point to 1.00% by the end of 2015 and 0.50 percentage point to 2.25% by the end of 2016."
"However, the higher Fed funds rate projections still highlight that on balance the FOMC is becoming more confident over the outlook for the US economy with QE set to end by October and the first Fed funds rate hike expected in the 2H 2015. Investors have also interpreted the discussion in the minutes over the amount of slack in the labour market as dovish."
"Participants generally agreed that the labour market had continued to improve, although considerable slack remains. There was a range of views over how much slack remained with several participants noting high levels of long-term unemployment and part-time workers, and low nominal wage growth. The recent pull back in short-term US yields and US dollar following the NFP report and FOMC minutes appears overdone with the US economy set to strengthen further during 2014."