Implications of a delay in September – Nomura

FXStreet (Guatemala) – Analysts at Nomura said that the question is: What does a scenario of no hike in September mean for the market?

Key Quotes:

“The Fed is trying to move clearly away from forward guidance. This means that if there is no hike in September, there may also be doubts about December. The basic point is that it would be hard to deliver a “hawkish delay.”

If we assume no action in September, and some dots moving to 2016 lift-off, then we may only price a hike by December by, say, 50% (a repeat of the situation we had for September up until today). This would imply that January Fed Funds can rally close to 10bp, and the 2-year rate perhaps 10-15bp (from Wednesday’s closing levels).

Normally, this would be considered positive for risk assets, but given that a delay may be partly linked to global economic slowing, it is not obvious that this would be the case this time around.”

Analysts at Nomura said that the question is: What does a scenario of no hike in September mean for the market?

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