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23 Jan 2015
Fed unlikely to change its statement - Commerzbank
FXStreet (Córdoba) - Following the ECB decision the market focus is shifting to the Fed next week, which in Esther Reichelt analyst at Commerzbank’s view, is unlikely to change its statement to a large extent and so the FX market will continue to doubt substantial rate hikes during the year. “On the contrary, markets are pricing increasingly hesitant central banks”.
Key Quotes
“After the Swiss National Bank abolished the EUR/CHF minimum rate in a surprise move and the Bank of Canada cut rates in an equally unexpected step, the FX market expects other central banks to increasingly backpedal and no longer ‘look through’ low inflation rates”.
“There is no immediate end in sight for highly accommodative monetary policies anytime soon. The only central bank which appears to be still going against this dovish sentiment is the Fed. It will probably leave its statement largely unchanged after the decision on interest rates on Wednesday. This applies especially to the real economy aspects, which continue to argue for substantial interest rate hikes of 25 basis points per meeting from the summer.
“This is unlikely to convince the market that it is barking up the wrong tree with its current scepticism against Fed rate hikes, especially as the Fed is also likely to point to the downside risks for inflation. However, this will not be enough for lasting US dollar weakness”.
Key Quotes
“After the Swiss National Bank abolished the EUR/CHF minimum rate in a surprise move and the Bank of Canada cut rates in an equally unexpected step, the FX market expects other central banks to increasingly backpedal and no longer ‘look through’ low inflation rates”.
“There is no immediate end in sight for highly accommodative monetary policies anytime soon. The only central bank which appears to be still going against this dovish sentiment is the Fed. It will probably leave its statement largely unchanged after the decision on interest rates on Wednesday. This applies especially to the real economy aspects, which continue to argue for substantial interest rate hikes of 25 basis points per meeting from the summer.
“This is unlikely to convince the market that it is barking up the wrong tree with its current scepticism against Fed rate hikes, especially as the Fed is also likely to point to the downside risks for inflation. However, this will not be enough for lasting US dollar weakness”.