29 Apr 2015
Markets well prepared for a dovish FOMC – RBS
FXStreet (Barcelona) - Previewing the key events ahead in the US, FX Trading Strategist at RBS, share their forecast US Q1 GDP and further view that market pricing for rates indicate that a possible dovish Fed is well prepared for.
Key Quotes
“The FOMC decision on Wednesday will include a rate decision along with a post-decision press release but the FOMC will not release new forecasts this week nor will Fed Chair Yellen give a post decision press conference. In the end, we don’t see tomorrow’s statement as a “game changer” for the USD.”
“There is little doubt that market participants expect a dovish tone in the statement in light of the further moderation in economic indicators since the FOMC last met, and we agree. With the rates market pricing the first full rate hike out of December and the USD Index testing its lowest level since early March, we see the market as well prepared for a dovish tinge from the FOMC statement.”
“The FOMC is moving to pure data dependence, and in a data dependent environment the value of FOMC signaling and communication is diminished because the FOMC appears less willing to pre-commit to policy.”
“In the end, we think the USD will be driven by the incoming economic data, including GDP data released just hours before April’s statement.”
“Our economists are below the consensus looking for a 0.8% q/q annualized growth rate in the first quarter. Our economists expect a broad based moderation relative to the fourth quarter, though investment in infrastructure (largely in the energy sector) and net exports (stronger USD) may be the largest first quarter drags.”
Key Quotes
“The FOMC decision on Wednesday will include a rate decision along with a post-decision press release but the FOMC will not release new forecasts this week nor will Fed Chair Yellen give a post decision press conference. In the end, we don’t see tomorrow’s statement as a “game changer” for the USD.”
“There is little doubt that market participants expect a dovish tone in the statement in light of the further moderation in economic indicators since the FOMC last met, and we agree. With the rates market pricing the first full rate hike out of December and the USD Index testing its lowest level since early March, we see the market as well prepared for a dovish tinge from the FOMC statement.”
“The FOMC is moving to pure data dependence, and in a data dependent environment the value of FOMC signaling and communication is diminished because the FOMC appears less willing to pre-commit to policy.”
“In the end, we think the USD will be driven by the incoming economic data, including GDP data released just hours before April’s statement.”
“Our economists are below the consensus looking for a 0.8% q/q annualized growth rate in the first quarter. Our economists expect a broad based moderation relative to the fourth quarter, though investment in infrastructure (largely in the energy sector) and net exports (stronger USD) may be the largest first quarter drags.”