Jan FOMC: Powelling through – TDS

Analysts at TD Securities (TDS) offer their afterthoughts on the January Fed monetary policy decision and its impact on the US Treasuries and the dollar.

Key quotes

“Changes to the statement were relatively small, consistent with no near-term plans for policy changes. Nor did the chairman suggest a need for changes to current accommodative policy settings anytime soon.”

“While he expressed some optimism about growth in the year ahead, he emphasized that the economy is a "long way" from the Fed's goals and talk of tapering is "premature."

“The Fed was not much of a market mover for the rates market. We remain short 10y Treasuries and positioned for 5s30s curve steepeners as we look for supply pressure to continue bear steepening the curve.”

“We maintain that near-term tactical risks favor a firmer USD and more focus may be placed on FX/equity correlations, which have only recently started to firm. Against this backdrop, the dollar bloc could lead losses, with AUDUSD looking rather precarious.”