Fed tightening risks have strengthened? - Scotiabank

Analysts at Scotiabank explained that, curiously, market pricing seems to suggest that Fed policy tightening risks have strengthened after the election – but that may be a reflection of post-election positioning rather than a firm view on the Fed; we think the risk of no move has risen, given uncertainty.

Key Quotes:

"We also expect heightened focus on Chair Yellen’s position, given the criticism that Trump has leveled against her. We expect a quick affirmation that she intends to serve until her term ends in 2018 - which would be welcomed by markets."

"However, we think the USD is at risk of extending losses near-term versus the likes of the EUR and JPY while the CAD and the MXN will continue to under-perform and US assets will attract a higher risk premium until prospects become clearer."