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28 Jan 2015
FOMC in focus but don't expect much – BTMU
FXStreet (Barcelona) - Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ, believes that only slight shift in wording is all should be expected by the FOMC’s statement today, further adding that any significant impact on USD will be unlikely today.
Key Quotes
“We do not see any dramatic changes to the statement – the key component will probably stay the same – that is the conclusion that the FOMC believes inflation will rise gradually back to the target as the labour market continues to improve.”
“There will most likely be changes to the description of current conditions. After all, WTI crude oil has declined a further 20% since the meeting on 17th December and that has resulted in the 5yr forward inflation breakeven falling a further 20bps to 1.79%, a level well below that reached after the Great Financial Crisis of 2008-09.”
“On a DXY basis, the dollar has also advanced a further 5.6% since that last meeting. But the FOMC will be assured by the fact that financial market conditions have also eased notably with the 10-year UST bond yield down 32bps since the last meeting which has helped to keep US equity markets well supported with the S&P 500 modestly higher than when the FOMC last met.”
“The Fed will also likely take some comfort from the monetary stimulus being offered elsewhere. The additional announced QE announced by the ECB in January (we estimate about EUR 45bn per month) plus the approximate USD 55bn of QE per month by the BOJ and the global central bank easing mentioned above more than compensates for the end of Fed QE3 last year.”
“we doubt we see much change in the statement today and any tweaks to the statement are unlikely to impact the dollar greatly. We do see risks of the FOMC being able to delay raising rates but the semi-annual testimony in February will be the platform for the Fed to relay any communication change, not today’s FOMC statement”
Key Quotes
“We do not see any dramatic changes to the statement – the key component will probably stay the same – that is the conclusion that the FOMC believes inflation will rise gradually back to the target as the labour market continues to improve.”
“There will most likely be changes to the description of current conditions. After all, WTI crude oil has declined a further 20% since the meeting on 17th December and that has resulted in the 5yr forward inflation breakeven falling a further 20bps to 1.79%, a level well below that reached after the Great Financial Crisis of 2008-09.”
“On a DXY basis, the dollar has also advanced a further 5.6% since that last meeting. But the FOMC will be assured by the fact that financial market conditions have also eased notably with the 10-year UST bond yield down 32bps since the last meeting which has helped to keep US equity markets well supported with the S&P 500 modestly higher than when the FOMC last met.”
“The Fed will also likely take some comfort from the monetary stimulus being offered elsewhere. The additional announced QE announced by the ECB in January (we estimate about EUR 45bn per month) plus the approximate USD 55bn of QE per month by the BOJ and the global central bank easing mentioned above more than compensates for the end of Fed QE3 last year.”
“we doubt we see much change in the statement today and any tweaks to the statement are unlikely to impact the dollar greatly. We do see risks of the FOMC being able to delay raising rates but the semi-annual testimony in February will be the platform for the Fed to relay any communication change, not today’s FOMC statement”