Video

John J Hardy
Saxo Bank’s head of FX strategy John Hardy takes a closer look at trends and moves in today’s forex charts, including EURUSD, USDJPY, AUDUSD, and EURSEK.
Squawk / 24 May 2017 at 18:12 GMT
Head of FX Strategy / Saxo Bank
Denmark
FOMC Minutes : reveal a robust discussion of how the Fed will roll out a reduction of its balance sheet, with "almost all" FOMC voters arguing in favour of a 2017 start to quantitative tightening (QT) via "roll-off caps". The minutes mention that an unemployment at or below 4.5% is below the Fed's long run level and suggest that some believe that recent lower inflation is due to transitory factors while others expressed concern on the inflation front. This and the other language is not enough to excite interest in upgrading the Fed's rate hike path as STIR futures rally a basis point or two in immediate reaction and the USD weakens slightly.

Some might argue that the FOMC minutes are from a meeting that came before all of the recent political noise that has so distracted markets, so the potential impact of the QT discussion may be somewhat reduced until the Fed updates its views at the mid-June FOMC meeting. But let's be wary of believing in the market's initial reaction.
2y
John J Hardy John J Hardy
There is also some focus on language indicating a need to ensure that the recent data slowdown is transitory before hiking again but the USD is already correcting back to where it was before the minutes release, so the interpretation of this is still very much in flux.
2y
John J Hardy John J Hardy
So "transitory" is mentioned 9 times in the minutes, 8 times to suggest that the FOMC views recent softer inflation and weak GDP data as likely to prove transitory and then the one mention suggesting it might be prudent to wait for evidence that the soft patch is transitory before hiking again.
2y
Fashionapolis Fashionapolis
it shows they wan to hike. just need data to support it and cover up their ass
2y
AIRLINE AIRLINE
Agree Fashionapolis, and I did also not see any words from Janet Yellen or the other members at Fed for their willingness to be locked up for creating the ground for very high inflation rates in the future, destroying peoples savings with ultra-low deposit rates and making major bobbles in the equity markets!
2y
Fashionapolis Fashionapolis
my guess is they will hike 1 or 2 more to 1.25% or 1.5% then talk about balance sheet trimming towards end of the year in Q4. 1% is still v low. so best to get to 1.5%. that is if all things go well smoothly to plan but nobody can say for sure. if nfp next week doesn't disappoint or within expectation, then i think a hike is almost a done deal. Can't say for sure about eur and gbp but an increase in usd for interest rate will most likely crush high yield currency like aud and nzd.
2y
Fashionapolis Fashionapolis
i believe they will hike to 1.5%, take a pause and then focus on balance sheet trimming for next year

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