USD Reversal Supported by the Comments from Fed Officials – Deutsche Bank
Research Team at Deutsche Bank, suggests that some attributed
yesterday’s reversal in the US Dollar off the lows to the comments from
Fed officials yesterday.
Key Quotes
“Both
San Francisco Fed President Williams and Atlanta Fed President Lockhart
stuck to the Fed script by not ruling out the possibility of a move
next month. Lockhart said specifically that ‘I would put more
probability on it being a real option’ and the ‘communication of
committee participants and members between now and mid-June obviously
should try to prepare the markets for at least a realistic range of
possibilities’.
Meanwhile, Williams went as far as to say that
should inflation continue to rise towards the Fed’s target and growth
rebounds towards his 2% target for the year, then ‘it would be
appropriate’ to ‘go that next step’ in hiking in June.
In fact
we’ve heard from Lockhart again overnight and while the bulk of his
comments reinforced those made during the day, he also added that the
uncertainty stemming from the Brexit referendum ‘has some potential to
loom large as we approach the June meeting’.
June is all of a
sudden looking like a big month for markets and it’s worth highlighting
that in the time between June 15th and June 26th, we’ll have the FOMC
meeting (on the 15th), BoJ meeting (on the 16th), BoE meeting (on the
16th), UK EU referendum (on the 23rd) and a possible Spain election on
the 26th. In the background we'll also have the ECB starting their
corporate bond purchases, with their success likely to be a big factor
in credit markets in June and beyond.”