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Dual mandate gone rogue - DB

FXStreet (Barcelona) - “How will the Fed respond to a dual mandate gone ‘rogue’? “ says Alan Ruskin, Macro Strategist at Deutsche Bank as he sees the US inflation rate going negative and the unemployment rate diving below 5% in a year’s time.

Key Quotes

“Using current oil prices and continued labor market trends, in a year’s time the US CPI based inflation rate will be negative, and, the unemployment rate will be at or below 5%. How will the Fed respond to a dual mandate gone ‘rogue’? “

“Don’t expect much more from the coming FOMC minutes on how the Fed will resolve the dual mandate divergence. Assuming we get something consistent with the October 29th Fed statement, the pattern whereby the S&P and USD/JPY have gone up in 5 of the last 5 FOMC minutes days is apt to be repeated.”

“In general, we continue to see the strong USD view more easily expressed through the JPY than the EUR. Though many factors may be contributing to the recent price action, in macro terms, the record divergence in Japan’s narrow basic balance deficit relative to the EUR area’s surplus is the dominant story, explaining the greater traction for JPY bearish trades, now that the most fleet of foot have already escaped the deterrent of negative EUR short-term rates.”

Japan Leading Economic Index rose from previous 104.4 to 105.6 in September

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