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Fed appears set for an extended pause - AmpGFX

According to Greg Gibbs, analyst at Amplifying Global FX Capital, risks are biased towards rate cuts in 2020 as far as Fed’s market pricing is concerned as the Fed fund futures are pricing in essentially no further rate hike through 2019.

Key Quotes

“This is a significant fall more than two further hikes in 2019 (in addition to the December hike) priced in at the peak in rates in November.”

“The Fed appears to have been shaken by the volatility in Q4 and the steeper fall in US asset prices and commodities following what now appears to be an ill-conceived further rate hike in December.  Their statements suggest that they are now in a mind to help stabilise financial markets and prevent a fallout to economic confidence.”

“This suggests that it will take a period of more stable and improved equity market performance and ongoing strength in real economic data before they hike rates further.  An extended pause in US rates now appears likely, and this may help support the recent trend towards stronger emerging market assets and currencies.  More generally we might expect further unwinding in the strength in the USD over the last year.”

 

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