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18 Mar 2015
Yellen’s speech might be mildly USD negative – DB
FXStreet (Barcelona) - Alan Ruskin, Macro strategist at Deutsche Bank, comments that in today’s FOMC meeting Yellen might be viewed as mildly USD negative, but any sustained USD move lower would be unlikely.
Key Quotes
“In the immediate term, […] it is important for US bulls that the USD surge does not slow the US economy down to the point where it undermines the rate hike expectations that underpin the USD.”
“We do not believe we are there yet, but there is little doubt USD strength has reached the point where it has become a factor that will slow its own progress, all of which is consistent with our reluctance to extend our EUR/USD year-end call beyond parity for 2015.”
“As we move forward, the USD moderate l/t overvaluation will detract from the hedging driver that has been a key source of recent USD strength, and Fed rate hikes will become progressively more important in propelling the USD bull cycle, as it draws fresh flows into US deposit and fixed income instruments.”
“…the extent that the Fed Chair acknowledges the USD’s negative impact on growth will likely dictate much of the currency markets reaction. The risk is she is viewed as mildly USD negative, because tightening of US financial conditions has recently entered the realm where it has become another consideration to slow the Fed tightening cycle down.”
Key Quotes
“In the immediate term, […] it is important for US bulls that the USD surge does not slow the US economy down to the point where it undermines the rate hike expectations that underpin the USD.”
“We do not believe we are there yet, but there is little doubt USD strength has reached the point where it has become a factor that will slow its own progress, all of which is consistent with our reluctance to extend our EUR/USD year-end call beyond parity for 2015.”
“As we move forward, the USD moderate l/t overvaluation will detract from the hedging driver that has been a key source of recent USD strength, and Fed rate hikes will become progressively more important in propelling the USD bull cycle, as it draws fresh flows into US deposit and fixed income instruments.”
“…the extent that the Fed Chair acknowledges the USD’s negative impact on growth will likely dictate much of the currency markets reaction. The risk is she is viewed as mildly USD negative, because tightening of US financial conditions has recently entered the realm where it has become another consideration to slow the Fed tightening cycle down.”