Market Analysis from Synergy FX
The US Federal Open Market Committee is Ready for Lift Off......but Cautious into 2016
Taking into account the better-than-expected economic data points since the March FOMC meeting, many market commentators were expecting the Federal Open Market Committee (FOMC) to strike a decisively bullish tone at today's meeting.
Whilst Janet Yellen's statement and overall comments couldn't be defined as dovish, it was clear that the market was expecting a more hawkish slant on the timing and trajectory of the FED's next policy move.
The market news wires are already filling up with speculation of why the FOMC wasn't as upbeat as could have been justified. Some say they were influenced by the IMF's request to hold off on hiking rates, while others cite the ongoing uncertainty in Greece......almost all are referring to the brevity of the statement; which was the shortest text in 3 year.
On balance, and without speculation, there are several facts that traders can take away which underscore the FED's plans to be the only Central Bank to raise rates in 2015.
1) Dot plots imply 2 rate hikes in 2015.
2) 15 of the 17 FOMC members see lift off in 2015.
3) Employment estimates were raised for the rest of 2015
4) GDP forecasts were lowered for 2015 but raised significantly for 2016.
5) Average FED Funds rate for December forecast at .62 basis points.
Looking ahead, Synergy FX expect a heightened market awareness for first tier US economic data as each report will be viewed through an interest rate prism with FED policy implications.
As such, we don't believe that the FED's less hawkish tone today has derailed the USD bullish trend. In fact, in a market environment where the ECB, RBA, BoJ and RBNZ are either easing rates or planning on it, the USD will remain firm.
Therefore, Synergy FX suggest using this latest pullback as an opportunity to re-establish long USD positions against the G-7 pairs over a medium term horizon.
18th June 2015