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USD: Dudley sets conditionality on a 2015 Fed lift-off - MUFG

FXStreet (Delhi) – Derek Halpenny, Research Analyst at MUFG, notes that the US Fed’s Dudley did repeat that a 2015 rate increase was his current view however his comments were certainly a bit more nuanced with his rate timing view conditional on his forecast being achieved.

Key Quotes

“Given the explicit comments from FOMC Governors Brainard and Tarullo for a delay in a rate increase to 2016, the markets were very focused on Vice Chair Dudley’s speech yesterday.”

“He did then also say that the recent evidence points to the economy slowing. So really as usual, the FOMC is data dependent and hence the payrolls reports on 6th November and 4th December will be crucial as will consumer spending data for the month of October, released in November.”

“Cleveland Fed President Mester also spoke yesterday and there was no surprise in her comments which have been consistent in calling for a rate increase to take place this year.”

“Our sense though is that the dollar remains vulnerable to further weakness given the US economic data is likely to remain mixed for now. While we believe the Fed should be lifting rates anyway, the financial markets continue to price more willingly the prospect of a delay into 2016 and short-term yields suggest the dollar is prone to further weakness. With little in the way of top tier data now until the start of November, the dollar is unlikely to derive support from developments in the US.”

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