Market Expectations Are “Out Of Sync” With Federal Reserve Monetary Policy, stated by Fed’s Dudley today as he sees that Bernanke’s statement from the last FOMC Press Conference did not indicate that the Federal Funds Rate hike is coming soon or Feds will end QE at the next meeting. As a matter of fact, here are some highlights by Fed Dudley:
Joining Dudley, Fed’s Powell (FOMC voter) also chimed in and said that market expectations for a 2014 rate increase are out of line with Fed’s view, it is most likely QE will continue for some time. Furthermore, Power stated that “Data is more important than dates in QE.”, which echoes what other members have to saying lately, which is to focus more on economic data rather on dates.
Looking at recent economic data out of U.S., aside from somewhat impressive improvements out of the housing sector, most other data have been inline or slightly worse, especially after the Q1 Final GDP q/q release on Wednesday, which missed forecast of 2.4% and came in at just 1.8%. Considering that most analysts average forecast for Q1 GDP during the first GDP release was 3.0%, it is a wake up call that perhaps the market has been overreacting.
Using statements from Fed’s Dudley,
… it’s easy to see that USD strength is not sustainable. Perhaps we’ll see some resilience in the USD for as long as economic data are strong, but as soon as disappointing news hit the market, we’ll see some sharp USD sell-offs as traders take profit and close their long USD trades. My view is to BUY EURUSD on major support or after negative US news releases, as we are likely to see a more profound selling pressure on the dollar.
Market Expectations Are “Out Of Sync” With Federal Reserve Monetary Policy…
June 27, 2013 by 1 Comment