Thursday, November 19, 2015

Post-minutes long USD squeeze likely limited, stay short NZDUSD - BNPP

FXStreet (Delhi) – Research Team at BNP Paribas, notes that the minutes to the FOMC’s October policy meeting did little to change the Fed outlook, confirming market consensus that without an unanticipated shock that adversely affects the outlook the Fed will raise rates in December and that the pace of tightening is likely to be gradual thereafter.

Key Quotes

“We expect the latter theme to become increasingly prevalent in Fed commentary as questions on the timing of the first rate hike become less pressing, and, while the USD outlook did not feature prominently in the minutes, we think the pace of USD gains is likely to be an important input into the pace of hikes.”

“The USD has weakened broadly after the minutes with EURUSD squeezing above 1.07, but we think this is probably driven by profit taking, and, given light long USD positioning is not likely to persist. In his inaugural speech Dallas Fed President, Robert Kaplan, a voter in 2017, sounded a good-deal less hawkish than his predecessor Richard Fisher and emphasized that after lift-off policy will remain accommodative for some time. We remain short NZDUSD in our cash recommendations portfolio from 0.6565.”
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