The Fed and markets are walking a tight rope
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
There's a conundrum in markets and the Fed. If they promise to hike it sets off a round of US dollar strength, bond sales and risk aversion that sends them scurrying back to dove-land.
In turn, that reaction function makes it almost impossible to hike.
Société Générale global strategist Kit Juckes put it perfectly today.
"The line between higher U.S. yields being modestly positive for the dollar, a healthy reaction as we prepare for more Fed policy normalisation, and being a trigger for yet another round of risk aversion, boosting the yen and hurting asset markets globally, is frighteningly small," Juckes said.
That's the essence of the ebb and flow that will play out until June 15, when the Fed inevitably backs down (but might just warn of a July hike).
source