What To Expect From FOMC Minutes? Market predictions and reactions - page 2
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Big Ben's school - Yellen is showing that she is exactly the same as the rest of them
Now they are going to do the same with NFP data
Currencies’ Wild Ride to Get Wilder as U.S. Rate Rise Beckons
If you thought the past week in the foreign-exchange market was wild, you haven’t seen anything yet.
That’s the outlook from investors and strategists ranging from State Street Global Advisors to Cambridge Global Payments after price swings in the euro versus the dollar approached the highest level in more than three years.
Volatility surged as traders unwound bets for gains in European bonds and stocks that had been funded in euros, prompting demand for the shared currency to close out what are known as carry trades. Price swings accelerated Friday after a lackluster U.S. employment report, raising more questions than answers about the timing of Federal Reserve interest-rate increases.
“This unusual backdrop is going to create some turmoil,” Dan Farley, the Boston-based chief investment officer for the investment solutions group of State Street, which manages $2.4 trillion. “The next several weeks are likely to be choppy as things continue to be absorbed, bouncing off the good and the bad news.”
The euro’s one-month implied volatility jumped as high as 13.2 percent, inching toward the 14 percent level where it last closed in December 2011. The common currency was unchanged on the week at $1.1199 as of 5 p.m. on Friday in New York.
The Bloomberg Dollar Spot Index slid 0.7 percent, falling a fourth week in its longest run of declines since October 2013. The greenback weakened 0.3 percent to 119.76 yen.
Debt Selloff
Europe’s bond rout wiped more than $400 billion from the value of the region’s debt in the past two weeks as investors questioned whether the European Central Bank will continue its program of asset purchases through September 2016 amid signs the region’s economy is picking up.
The selloff eroded the premium Treasuries pay over bunds to the narrowest since February, lessening the attractiveness of dollar-denominated assets.
“You’re going to see continued volatility driven by the bond markets,” said Karl Schamotta, director of foreign-exchange research and strategy at Cambridge Global Payments in Toronto. “Investors are increasingly concerned that they could be caught in the exits when everyone rushes out of the theater.”
The greenback fell against most of its major peers this week as a Labor Department report showed American employers accelerated job creation in April after monthly hires fell to the lowest since 2012 in March.
Dollar Decline
The Fed is scrutinizing such data as it considers raising rates for the first time since 2006. Policy makers noted that the pace of job gains in the U.S. had “moderated” in minutes from their last meeting on April 29.
“What we need to see is some consistently positive data out of the U.S.,” Lennon Sweeting, a Toronto-based dealer at the broker and payment provider USForex Inc., said by phone. “I don’t think the dollar is totally in the clear just yet.”
The dollar has fallen 3.5 percent in the past month, Bloomberg Correlation-Weighted Indexes show. The euro by contrast has added 0.7 percent.
Economic reports next week may provide a catalyst for the dollar to resume its rise, with the publication of the Fed’s index of labor market conditions and data on retail sales and industrial production.
“If you’re in the camp that believes that growth in the economy is back on track, the dollar should be back in its upward trend,” Minh Trang, a senior foreign-exchange trader at Silicon Valley Bank in Santa Clara, California, said by phone.
source
Bulls Show Determination Ahead of FOMC minutes, Wall St at Records
Bulls on Wall Street showed sheer will on Tuesday, by pushing both the S&P and Dow Jones index to new intraday records despite strong housing updates, which emerged among mostly downbeat US macro updates recently.
"I thought we had moved past good news is bad news for equities. We seem to be fixated still on the Fed question in the debt markets and whether interest rates are going to go up," EverBank World Markets president Chris Gaffney said.
Moreover, bulls were able to overcome restraints in the form of spiking Treasury yields along with the recovering greenback.
The Standard & Poor's 500 index added 0.09% to 2,131.16 points, hitting the all time high at 2,133.40.
Among the other indices, the Dow Jones Industrial Average increased 0.24% to 18,342.16 points and also reached a new intraday record at 18,352.50, while the Nasdaq Composite edged 0.03% higher to 5,079.86 points on Tuesday.
Powerful housing data
Shortly before the opening bell, the US Census Bureau published April's update of housing starts which showed a massive improvement after two mediocre readings. The latest figure for housing starts roared to 1.135 million in annualized terms in April, beating the expectations of 1.015 million, from the upwardly revised 0.944 million hit in March.
Meanwhile, building permits hit 1.143 million in April, better than the expected 1.064 million and rising from a revised 1.039 million booked during the previous month.
The housing market is one of the areas of strength in the US economy, according to the Federal Reserve. However, the major event will be the Federal Open Market Committee's meeting minutes, due out on Wednesday, and these will likely dictate sentiment for the rest of this week.
Corporate news
Retail corporation Wal-Mart said it earned $1.03 per share in the first quarter, worse than the $1.11 per share recorded last year, with sales of $114 billion missing estimates of $116.2 billion. Its shares declined 3.76% to $76.0 per share on Tuesday.
Home improvement retailer Home Depot lifted its full-year sales and earnings guidance, after reporting better profit for the first quarter than in the year-ago period. However, its shares gave up 0.74% to $113.48 per share.
After Monday's closing bell, retailer Urban Outfitters reported first-quarter profit that worsened from the year-ago period, missing estimates. Its revenue rose 7.7%, but failed to meet expectations. Shares of the clothing retailer slumped over 15% to $33.97 on Tuesday.
The mobile phone operator Vodafone informed that its sales increased during the March quarter, showing the first leap of sales in almost three years. Moreover, the company expected earnings growth in 2016 after seven years of decline. However, Vodafone plummeted 3.70% to $35.15 per share.
source
Why The FOMC Could Cause A Euro Rebound
Cable popped slightly in the aftermath of the release of the BOE minutes, rising above the 1.5500 figure in morning London dealing. The minutes offered little fresh information, essentially reaffirming the view that UK monetary policy will remain on hold for the foreseeable future.
However, one sentence leaped out at traders as the minutes noted that:
Although this was hardly a resounding statement of hawkishness, it does suggest that most MPC members believe that the current low inflation conditions are a temporary result of a steep drop in energy prices and that price levels are likely to rise as wage pressure begins to build. Therefore, it's clear that the MPC is leaning towards a tighter stance, but may wait perhaps until 2016 before it begins its rate normalization program.
Elsewhere, the euro remained under pressure, testing the 1.1100 barrier in late Asian session trade but finding some buyers underneath that level to pop back above the figure by mid morning London trading. The selloff in the pair is unsurprising given the unresolved nature of negotiations with Greece and the tepid economic performance in the region. Today's sharp decline in construction output to -1.8% from 0.8% the month prior is just the latest data point to miss its mark.
Tomorrow, the market will get a good glimpse at the latest conditions on the ground as Flash PMI services will be released. But given the lackluster pace of growth in the region, it's doubtful that May saw much of an improvement in economic activity.
The euro rally has always been much more about the disappointment in the dollar rather than any genuine demand for the euro. To that end, today's FOMC minutes could continue the seesaw action in the pair, if the FOMC proves to be dovish. Overnight, Chicago Fed President Charles Evans suggested that rates should remain on hold until 2016 given the lack of inflation in the US system. If his view is the dominant voice in the minutes, the EUR/USD could reverse most of its losses as the currency market will once again sell the dollar.
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Fed Doesn't Rule Out June Liftoff As FOMC Minutes Show Fed Fears Post-Hike Volatility
With all eyes focused on the minutes - as markets play "tightening chicken" with The Fed with stocks flat, gold flat, and short-end bonds flat since the April FOMC - any hint that,despite the terrible data, The Fed has to move, will surely be met with horror...
And yet:
So, once again, just enough there for both bulls and bears from doves and hawks as it becomes increasingly clear that The Fed is cornered.
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Typical - keep the hopes and have no idea what to do
Yellen Shrugs off Weak Data; Reiterates Call for Hike This Year
The Chair of the Federal Reserve Janet Yellen is still determined to start tightening monetary policy this year, despite the surprisingly weak performance of the economy in recent months, which she said was due to "a variety of transitory factors that occurred at the same time."
These factors - bad weather, worker strikes as well as statistical noise - have been commonly referred to by Fed officials, and also appeared in the minutes of the April Federal Open Market Committee meeting.
However, Yellen's prepared remarks did not show any meaningful change in her views compared to, for example, her March press conference.
She still thinks that "it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy," providing that the labor market and inflation continue to improve.
Yet, there are also factors that are restraining the economy which will not go away any time soon, the leader of the US central bank told the local Chamber of Commerce.
These headwinds include only a gradual and slow recovery in the housing industry. Yellen noted that "many years of a weak job market and slow wage gains seem to have induced many people to double-up on housing, and many young adults continue to live with their parents."
Government figures on home construction released earlier this week inspired some confidence among investors and even though the number of housing starts soared in April, activity is still far below historical norms.
The tepid growth in new housing is putting a strain on home buyers, as once again, prices are approaching a double-digit pace of annual appreciation, which is much faster than wages and incomes are growing.
Furthermore, the April minutes revealed policymakers were increasingly concerned about the markets' reactions to the eventual rate hike as two years ago, the mere mention of a change in the Feds tactics caused bond yields to spike. Mortgage rates got swept along and the result was a fall-off in the housing recovery.
Furthermore, Yellen also pointed out that companies continue to sit on money rather than investing it.
"Businesses seem not to have had sufficient confidence in the strength and durability of the recovery to undertake substantial capital expenditures," she said. Uncertainties not only about the economy in general, but also about economic policies "could be a significant factor" causing businesses to holding on to large amounts of cash.
This is unlikely to change in the near-term, Yellen acknowledged, pointing to a plunge in outlays in the energy sector.
"New domestic oil drilling has plunged over the past few months, and we have also seen a slowdown in activity in sectors that supply oil production companies, including steel and certain types of machinery."
"This represents the negative side to the fall in oil prices, one being felt by the oil-producing regions of the country," the Fed chief said, however, "the plusses for energy consumers from the fall in oil prices almost surely outweigh the minuses."
In any case, she reiterated that the Fed stood ready to act on rates based on incoming data and adjust policy accordingly.
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She probably did not have time to write a new speech
She probably did not have time to write a new speech
Or she forgot which one she has to read
What to expect from the FOMC meeting this week - view from 8 banks
The Federal Open Market Committee (FOMC) of the US Federal Reserve meet this week, here's a preview.
Just doing a bit of a catch up, here are 8 'what to expect's in brief:
BoA / Merrill Lynch
BNP:
(Note - SEP is Summary of Economic Projections - it reports on real GDP growth forecasts from the Federal Reserve Board members and Federal Reserve Bank presidents)
CitiFX (Steve Englander) comments on the timing of a Fed hike & what it might mean for the dollar ... will an earlier hike be a catalyst for "round 2 of the USD gains?"
Credit Suisse:
Société Générale look for:
Barclays:
Bank of Montreal expect a more sightly dovish lean:
CIBC: