Fed timings and dollar implications – Rabobank

FXStreet (Guatemala) – Analysts at Rabobank noted that the market is hoping that Fed Chair Yellen will use the June 16/17 FOMC to provide direction as to the timing of the first Fed interest rate hike.

Key Quotes:

“A more hawkish Fed is likely to underpin the USD but it is possible to argue that the relationship between the Fed’s policy decision and the USD has taken on a chicken and egg quality. “

“The rise in the broadbased value of the USD between July 2014 and April 2015 has already acted as a monetary tightening in the US. This is an observation that President Obama may, or may not, have been referring to start of the week during the G7 meeting.”

“The impact of USD strength on the US economy therefore could and should impact the timing of the Fed’s policy decisions. The position of the greenback also has sway over other policymakers. “

“Emerging market countries with large USD denominated debts to finance will not welcome any further USD appreciation. By contrast USD appreciation has no doubt been welcomed by central banks such as the ECB, BoJ, RBNZ and RBA all of which have used policy stimulus this year. The direction of the USD therefore could have influence on the tone of many other central banks over the coming months. “

Analysts at Rabobank noted that the market is hoping that Fed Chair Yellen will use the June 16/17 FOMC to provide direction as to the timing of the first Fed interest rate hike.

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