23 Mar 2015
USD strength to make a comeback over next 2 months – Investec
FXStreet (Barcelona) - Jonathan Pryor, Head of FX dealing at Investec, views that with dollar selling of rapidly post Yellen’s speech, USD strength will only make a comeback as more QE and election risks loom ahead for Euro and Pound respectively.
Key Quotes
“FX markets enjoyed yet another eventful time last week, culminating in a second sizeable US Dollar sell off on Friday, after Wednesday's Fed-driven Dollar blow-out had reversed throughout Thursday. On Wednesday, Fed Chair Yellen dropped the word 'patient' in reference to rate rises, but she highlighted the Fed wouldn't be impatient - the tone had changed from her semi-annual speech just a few weeks ago.”
“"It will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labour market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term." The Fed lowered their long run unemployment target and again shone the light on inflation giving themselves further room to hold rates if needed.”
“This has certainly increased volatility, as the market is a little less certain of what the Fed will do, compared to this time last week.”
“That said, with more QE and the general election looming for the Euro and Pound respectively, the Dollar should continue to strengthen over the next couple of months as a default winner, albeit at a more modest pace than it had been.”
“As we head into this week's data, market focus will certainly be on US inflation data for any signs lower oil prices are feeding through to higher consumption and rising prices.”
Key Quotes
“FX markets enjoyed yet another eventful time last week, culminating in a second sizeable US Dollar sell off on Friday, after Wednesday's Fed-driven Dollar blow-out had reversed throughout Thursday. On Wednesday, Fed Chair Yellen dropped the word 'patient' in reference to rate rises, but she highlighted the Fed wouldn't be impatient - the tone had changed from her semi-annual speech just a few weeks ago.”
“"It will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labour market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term." The Fed lowered their long run unemployment target and again shone the light on inflation giving themselves further room to hold rates if needed.”
“This has certainly increased volatility, as the market is a little less certain of what the Fed will do, compared to this time last week.”
“That said, with more QE and the general election looming for the Euro and Pound respectively, the Dollar should continue to strengthen over the next couple of months as a default winner, albeit at a more modest pace than it had been.”
“As we head into this week's data, market focus will certainly be on US inflation data for any signs lower oil prices are feeding through to higher consumption and rising prices.”