Goldman: Don't Bet On Much Dollar Strength In 2014 Despite Fed Tapering
Focus of the day:
"A simple working hypothesis is that Fed tapering is a form of monetary policy tightening and, all else equal, this will likely translate into broad Dollar strength. Implicitly, this is often based on the assumption that rate differentials will move in favour of the Dollar.
However, this is likely to be too simplistic a view, because it does not take into account the important differences between DM (розвинуті ринки) and EM (ринки, що розвиваються), as 2013 has shown. Both the EUR and USD TWI (trade-wеighted index = зважений за торгівлею курс) have been among the best-performing currencies globally in 2013. More specifically, the Dollar strengthened against most currencies but not against the second most liquid one globally, the EUR, which commands considerable trade weight. It is therefore important to look in some detail at the kind of USD strength that we are really talking about.
In the coming year rate differentials between the Dollar and other G10 currencies may indeed move in favour of the USD from current levels, in particular in the 5-year sector. This would be consistent with the assumption that threshold guidance will ultimately be limited in its ability to keep intermediate yields anchored in light of accelerating growth. However, the Dollar is unlikely to react to changes in intermediate maturities alone, and rate differentials on other maturities are less likely to change.
Bottom line. We expect very selective and generally moderate Dollar strength, with the likely result that USD-bullish consensus forecasters could be disappointed for a second year in a row. Under the surface, however, we expect more notable USD strength versus commodity FX and some EM currencies. "
Thomas Stolper, Robin Brooks, and Fiona Lake - Goldman Sachs
форвардні курси ГРИВНІ на ринку NDF USD/UAH (для нерезидентів) :
варто звернути увагу на очікувані відсоткові ставки грошового ринку, що приймаються до розрахунку форвардного курсу від поточного курсу спот (= звичний для нас курс на МВРУ)
Summary of October FOMC meeting minutes & potential timing of first rate hike
In hindsight, key Fed proclamations over the past 24-hours are more meaningful:
• Yellen: Monetary policy likely to remain highly accommodative long after thresholds reached • Evans: Fed probably will purchase $1.5T in assets from Jan. 2013 until QE is wound down • Bernanke: Interest rates to remain low until “well after” 6.5% unemployment threshold reached
Two months ago, pre-Sept. FOMC announcement, the market was priced to see the first rate hike (to 0.50%) in March 2015, however as of today (post-Oct. meeting minutes) the curve has not only flattened, but has also shifted materially to the right. Accordingly, the market now believes the timing of the first Fed rate hike is Nov/December 2015!
вірогідно, по факту засідання ФРС США (сьогодні) очікування першого підвищення ставок та темпів нормалізації монетарної політики будуть відкладені на довший час :
Market Forecast: Our primary scenario is for the Fed to remain on the sidelines, as such it may see a rather limited reaction in risk assets and the dollar. Technically, we think there is potential for the market to get whipsawed, with the most likely initial reaction to dump the USD. Under this scenario, we would not be surprised if USDJPY approached the key 101.50/65 zone, which sees the convergence of July’s 2013 high, 78.6% retracement of May-June decline and the December low around 101.60, before ultimately recovering. Additionally, it may also be prudent to keep an eye on other U.S. market bellwethers for a potential indication of the direction of the dollar over the coming days, as the S&P500 is less than 2% below its all-time high, while the US 10-year yield remains below the key 2.89/90% level – 78.6% retracement of Sept-Oct. decline, trendline resistance, Sept. 18th yield high and psychological & barrier/option related.
We continue to think that the MT outlook will be determined on the FOMC meeting later today, but until then GBPUSD has been given a boost and is re-testing recent 1.6360 highs. 1.6420 – the high from 12th Dec is still ST resistance, ahead of 1.6466 – the high from 10th Dec. In the short term, the bias is higher above 1.6330, the daily pivot. If the Fed does not taper this evening (as we expect) then we could see GBPUSD attempt to test 1.6620 – the highs from August 2011 and a major medium-term resistance level being eyed by the market. Of course, above here could see the BOE get a bit more vocal about the strength of the pound, so you better watch out!
EURGBP is also worth watching; it fell below the 50-day sma at 0.8415 and is testing the key 0.8400 level. It is starting to look oversold in the ST, but while the focus remains on the strength of the UK recovery we could see back to the 10th Dec lows sub 0.8350 in the next couple of days.
- “Committee sees the risks to the outlook for the economy and the labor market as having become more nearly balanced” - Committee decided to modestly reduce the pace of its asset purchases (beginning in January)” - Fed to cut monthly asset purchases to $75B – MBS to $35B & Treasuries to $40B ($5B each) - If incoming information supports ongoing improvement, Committee will likely reduce pace of QE at future meetings - Asset purchases not on preset course, pace contingent on labor market & inflation - Reaffirmed rates at 0-0.25% as long as unemployment rate remains above 6.5% & projected inflation remains below 2.5% - Appropriate to maintain the current fed funds rate well past the time unemployment rate <6.5%, especially if projected inflation continues to run <2% goal
December summary of economic projections for 2014 (from October):
* GDP: 2.8 to 3.2 from 2.9 to 3.1 (wider range) * Unemployment Rate: 6.3 to 6.6 from 6.4 to 6.8 (lower) * PCE Inflation: 1.4 to 1.6 from 1.3 to 1.8 (narrower range) * Core PCE Inflation: 1.4 to 1.6 from 1.5 to 1.7 (lower)
In his press conference, Bernanke stated “my expectation is for similar moderate steps (~$10B taper) going forward throughout most of 2014”, he also added that they could stop tapering for a meeting or two if the economy disappoints or even pick up the pace if the economy improves more rapidly. However the real message which seems to be getting across to the markets was “nothing we did today was intended to reduce accommodation…will still be buying assets at a high rate, increasing our balance sheet and holding onto those assets…we strengthened our guidance to make clear we expect to keep rates low well beyond the unemployment rate of 6.5%.”
Market response since the announcement:
* USD saw a major whipsaw versus the majors – generally within 25 pips of pre-FOMC levels * US equities are significantly higher – DJIA +190 points * Treasuries whipsaw, but remains flat – 10 year yield is within 1bp of pre-FOMC levels.
Below you will find the December and October statement comparison, with omissions Strikethrough (in grey) and additions bold (in blue). The remaining text in black has not changed from the prior statement :
• Formed Double Top at 1.3810 earlier today • Massive reversal & break below DT point of reference at 1.3710 (bearish) • Height of pattern is ~100 pips • Daily close below needed for Double Top pattern confirmation • Nearing trendline support drawn from 11/21 low at 1.3675 • Daily RSI broke below corresponding trendline support prior to price (bearish)
If this gives way, confluence of technical support at 1.3600/20:
• November high • 38.2% retracement of Nov-Dec. rally • Double Top measured move objective • 50-day sma • 13-week sma (not shown)
Додано: Пон 16 гру, 2013 13:29
