Here is the kneejerk reaction from Citi on what it dubbed a “mildly hawkish” statement:
The only thing that’s hawkish, says CitiFX Strategist Steven Englander: *FED SAYS `NEAR-TERM RISKS’ TO ECONOMIC OUTLOOK HAVE DIMINISHED
However, Englander doesn’t take this as a signal to jump into September pricing. He says the Fed likely just wants to inject some optimism in the economy given recent data.
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CitiFX Strategist Richard Cochinos calls it mildly hawkish – citing the points noted on CitiFX Wire. George dissents again. Risks have diminished. He also nods to the Fed’s note that labor utilization has diminished. What to trade?
“Best to trade long USD against the USD-bloc, our favorite being long USDCAD. Also EURUSD and GBPUSD to weaken – USDJPY might be a bit mixed until Friday. The market is likely to continue bias long-USD into NFP (which is still a week away), but given the trend in jobless claims, its hard not to have “some” positive expectations for next Friday.”
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And the immediate FX reaction:
- USD has gained across the board, but the moves are already been partially retraced in G10, but not in EM FX.
- NZD has been the biggest mover against USD, losing about 45 pips in the sell off. AUD has also been hit somewhat, but it’s a fairly limited move.
- In G3, EURUSD trading down almost 40 pips before largely retracing. Similarly, the reaction in USDJPY was not significant, while GBPUSD is in fact bouncing up slightly on the decision.
- USDMXN has bounced up from 19.95 to a hhigh of 18.92. Elsewhere in Latam, USDBRL is not far behind trading higher by about 115 pips, now at 3.2923.
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