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18 Sep 2014
Fed confirms process of normalizing policy, USD trend here to stay - Nomura
FXStreet (Bali) - Nomura notes that Wednesday's FOMC outcome confirms the notion that the Fed is in the process of normalizing policy, which should translate in the USD trend being sustainable.
Key Quotes
"The FOMC made minimal changes to the FOMC statement and its central tendency economic forecast. But the FOMC did revise its rate projections substantially higher, both for 2015 and 2016, and the new 2017 rate projections were on the high side of expectations. In addition, there were two dissenters, who were not comfortable with the current forward guidance."
"Hence, the underlying view on the FOMC is more hawkish than in June, but the committee nevertheless chose not to reflect that in changed communication in the written statement. That said, Chair Yellen stressed the data dependency of the Fed view and rate projections and also pushed back in the Q&A on the notion that the committee employed calendar-based forward guidance. Hence, there is an indirect weakening of the forward guidance through Yellen‟s tone in the press conference and repeated emphasis on data dependency."
"From a big picture perspective, this confirms the notion that the Fed is in the process of normalizing policy. This should mean that the trend, which we have seen in recent months, of a stronger Dollar versus G10 currencies, can be sustained, although temporary setbacks can always happen."
Key Quotes
"The FOMC made minimal changes to the FOMC statement and its central tendency economic forecast. But the FOMC did revise its rate projections substantially higher, both for 2015 and 2016, and the new 2017 rate projections were on the high side of expectations. In addition, there were two dissenters, who were not comfortable with the current forward guidance."
"Hence, the underlying view on the FOMC is more hawkish than in June, but the committee nevertheless chose not to reflect that in changed communication in the written statement. That said, Chair Yellen stressed the data dependency of the Fed view and rate projections and also pushed back in the Q&A on the notion that the committee employed calendar-based forward guidance. Hence, there is an indirect weakening of the forward guidance through Yellen‟s tone in the press conference and repeated emphasis on data dependency."
"From a big picture perspective, this confirms the notion that the Fed is in the process of normalizing policy. This should mean that the trend, which we have seen in recent months, of a stronger Dollar versus G10 currencies, can be sustained, although temporary setbacks can always happen."