Fed lift-off passes but communications point to further USD strength – MUFG

By FXStreet FXStreet (Delhi) – Derek Halpenny, European Head of GMR at MUFG, notes that the first rate hike by the Federal Reserve since June 2006 has finally taken place with the dollar firming modestly.

Key Quotes

“Reflecting the fact that the move and all that goes with it was well telegraphed with Fed Chair Yellen’s two speeches on 2nd and 3rd December containing much of the language used in FOMC statement or expressed by Chair Yellen in the press conference that followed. In our opinion the key highlights of crucial decision are as follows:

1) Economic developments are expected to only warrant “gradual” rate increases but crucially the path will be dependent on “incoming data”.
2) “Actual” as well as expected inflation will be “carefully” monitored.
3) The maintenance of the size of the balance sheet will be in place until normalisation of the fed funds rate is “well under way”.
4) The decision was unanimous, underlining the influence of Chair Yellen.
5) Despite the lowering of the core PCE inflation from 1.7% to 1.6% next year, the DOTS median fed funds rate by end-2016 was unchanged at 1.375%.
6) The DOTS median fed funds rate for 2017 and 2018 were lowered …read more

Source:: FX Street