Intraday Market Thoughts

No Hints of Hikes From Fed

by Adam Button
Jun 17, 2015 23:39

It wouldn't have taken much to convince markets that hikes were coming sooner but the Fed delivered nothing and dollar bulls were beaten up. The USD finished as the day's worst performer while the pound continued to soar. Another busy day is coming up.  A new Premium trade was opened today. The Premium cable long from June 8 long at 1.5370 hit its final target of 1.5670. EURUSD long at 1.1105 us 225-pips in the money. EURCAD and AUDNZD are also in progress.

The bias in the market was overwhelmingly evident as the hours ticked down toward the FOMC decision. USD/JPY climbed to 124.30 from 123.40 and the dollar held a strong bid as the minutes ticked down.

When the statement hit it was a complete reversal. The US dollar fell around 40 pips right across the board. The commentary was bland, offering no more than a slightly more upbeat tone on jobs and household spending. There was no hint on rates.

Many were focused on Fed forecasts, including the quarterly dot plot but there was a decided shift lower with 7 of 17 Fed members now below 0.50% for year-end. There's a good chance that 5 or 6 of the 10 Fed voters are in that group.

The final blow to the dollar came when Yellen said in the press conference that the Fed is waiting for 'more decisive data' before hiking. That sent the dollar another 40-50 pips lower across the board. Cable climbed a full cent as the May highs broke. The comment was the clearest sign that the Fed hasn't seen enough to be convinced of a September hike.

Where now? What happens in EUR/USD is likely to drive the next dollar move. The rise to 1.1359 today is the fifth test of 1.14 in the past month. Euro shorts have been steadfast but a Greek default is all-but-certain now and sellers haven't regained the upper hand. A squeeze above 1.14 could be harsh.

Greek headlines will continue to carry weight but Athens already said no proposals are coming in the day ahead. Instead, the SNB decision, UK retail and US CPI will be major events.

But first, at 2245 GMT, New Zealand CPI is expected to rise 0.6% q/q. A downside surprise would probably be overlooked by the market because the RBNZ has already cut rates but a strong number spark an outside rally because it argues against further rate cuts.

Act Exp Prev GMT
Eurozone CPI (MAY) (y/y)
0.3% 0.3% 0.3% Jun 17 9:00
Eurozone CPI - Core (MAY) (y/y)
0.9% 0.9% 0.9% Jun 17 9:00
Eurozone CPI (MAY) (m/m)
0.2% 0.2% 0.2% Jun 17 9:00

Latest IMTs