FXStreet (Delhi) – Kit Juckes, Research Analyst at Societe Generale, suggest that the most recent FOMC survey has shown 55% looking for no change and 45% looking for a hike, but that probably understates the shift in opinion, as those looking for ‘no change’ are more convinced of their case than those expecting a hike.
Key Quotes
“If market pricing reflects different degrees of conviction about the likelihood of a rate hike, then a move is likely to cause risk aversion as the front end of the US yield curve re-prices.”
“But longer-dated US yields may not rise much if at all. That suggests we would be likely to see the G3 currencies rally against those more correlated with equities/commodities/risk, but not necessarily move much between each other.”
“EUR/USD correlates far more at the moment with 10-year spreads than 2-year ones and might well simply stay in its range. The yen is the only currency that has out-performed the dollar in the 6 months after the start of each of the last 4 Fed rate-hiking cycles.”
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