11 Mar 2016
FOMC to steal all the limelight next week - Westpac
Richard Franulovich, Research Analyst at Westpac, suggests that the FOMC meeting will steal all the limelight next week.
Key Quotes
“The infamous dot plot is likely to show fewer hikes though the scale of the downgrade will disappoint the doves, the projection for 2016 and 2017 likely to show three hikes in 2016 and another three in 2017, vs four in each year as of the December projections.
Upside surprises on growth, jobs and inflation will alleviate concerns about downside risks and the Fed should declare that the risks to jobs and activity are “balanced”, a characterisation they eschewed in their Jan statement. The statement should also signal that upcoming meetings are “live”, using language not too dissimilar from that of Oct 2015 when the Fed put markets on notice that liftoff was nigh, “In determining whether it will be appropriate to raise the target range at its next meeting…”. Feb retail sales, Feb CPI and the March Philly and Empire survey headline the data calendar.
The USD has gone largely unrewarded for a material shift in a wide swathe of data including core CPI/PCE, retail sales, IP and payrolls. The improved tenor of the data has arguably boosted risk appetite moreso, at least so far, indirectly tarnishing the USD.
Next week’s FOMC should change that, as discussed above. With that shift in the Fed’s tenor the USD should begin to benefit from a likely continued trend of more positive data surprises, our US data surprise index still some distance from hitting levels that warn a reversal is imminent. DXY a buy into 96.0-96.5 if seen.”
Key Quotes
“The infamous dot plot is likely to show fewer hikes though the scale of the downgrade will disappoint the doves, the projection for 2016 and 2017 likely to show three hikes in 2016 and another three in 2017, vs four in each year as of the December projections.
Upside surprises on growth, jobs and inflation will alleviate concerns about downside risks and the Fed should declare that the risks to jobs and activity are “balanced”, a characterisation they eschewed in their Jan statement. The statement should also signal that upcoming meetings are “live”, using language not too dissimilar from that of Oct 2015 when the Fed put markets on notice that liftoff was nigh, “In determining whether it will be appropriate to raise the target range at its next meeting…”. Feb retail sales, Feb CPI and the March Philly and Empire survey headline the data calendar.
The USD has gone largely unrewarded for a material shift in a wide swathe of data including core CPI/PCE, retail sales, IP and payrolls. The improved tenor of the data has arguably boosted risk appetite moreso, at least so far, indirectly tarnishing the USD.
Next week’s FOMC should change that, as discussed above. With that shift in the Fed’s tenor the USD should begin to benefit from a likely continued trend of more positive data surprises, our US data surprise index still some distance from hitting levels that warn a reversal is imminent. DXY a buy into 96.0-96.5 if seen.”