27 Feb 2015
Too early to call the low for US inflation – TDS
FXStreet (Barcelona) - Shaun Osborne, Chief FX Strategist at TD Securities, views that the Fed might want to see more firm evidence before moving to tighten policy, as ‘low’ for inflation might actually come in May.
Key Quotes
“Higher than expected core CPI data from the US Thursday (let’s not ignore some solid headline and core durable goods data as well) served to drive US yields up and pull the USD broadly higher as well.”
“We think it is still too early to call the low for inflation—that will come in May, we expect—and the Fed will want to see firm evidence that the low is in before moving to tighten policy (not until September, we say).”
“So in a sense, yesterday’s data changes little—other than the broader perception for market participants that the low for inflation may be a little closer.”
“Firmer US yields support the USD broadly but do not necessarily warrant the USD moving significantly higher at this point we think; our FV estimate for the DXY (based on DXY-weighted 2Y yield spreads and terms of trade), suggest the USD is already quite fully valued at this point with the spot market today at 94.99 versus our fair value estimate of 93.60 at the close of business last night.”
Key Quotes
“Higher than expected core CPI data from the US Thursday (let’s not ignore some solid headline and core durable goods data as well) served to drive US yields up and pull the USD broadly higher as well.”
“We think it is still too early to call the low for inflation—that will come in May, we expect—and the Fed will want to see firm evidence that the low is in before moving to tighten policy (not until September, we say).”
“So in a sense, yesterday’s data changes little—other than the broader perception for market participants that the low for inflation may be a little closer.”
“Firmer US yields support the USD broadly but do not necessarily warrant the USD moving significantly higher at this point we think; our FV estimate for the DXY (based on DXY-weighted 2Y yield spreads and terms of trade), suggest the USD is already quite fully valued at this point with the spot market today at 94.99 versus our fair value estimate of 93.60 at the close of business last night.”