Medium term
Trade view / 22 November 2016 at 0:00 GMT

Fed rate decision: No hike, Fed behind the curve

APAC Sales Trading Desk / Saxo Capital Markets
Instrument: USDJPY
Price target:
Market price:


If there is no hike by the Federal Reserve in December, that will likely be met with the realisation that the Fed is behind the curve on inflation. Inflation expectation have soared in recent months.

Similarly, China PPI has moved into positive territory, implying the Chinese are export inflation again. And with US inflation a stones throw from the Fed's 2% target, this scenario would indicate the Fed needing to play catch up.

The Fed would then be forced to hike rapidly as inflation overshoots. This would pressure emerging markets and cause a rapid US dollar rise.


Buy USD/Emerging markets:
- buy USDMYR 1 Month at market, target 4.80
- buy USDKRW 1Month at market target, 1250
- Buy USDJPY 6 Month Call Spread 115 vs 120

USDJPY five-year chart

Editor's note: Please look at our dedicated rate-hike page for other scenarios that could result from the December meeting of the Federal Open Market Committee.

 — Edited by Robert Ryan

Non-independent investment research disclaimer applies. Read more


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