Thursday, May 19, 2016

Fed Insists June Is A Live Meeting

by: otterwood
The April FOMC minutes were released today and the hawkish bias led to a fall in investor risk sentiment. The minutes showed the Fed was worried the March meeting was interpreted as too dovish by investors and that a June rate rise would be “appropriate” if economic data continue to strengthen.
The initial market reaction looked similar to regime that led to the selloffs last August and at the beginning of this year, namely USD up and emerging markets down (see below).Equities managed to finish flat and we have yet to see how Asian markets react to the news but it may take a few trading sessions to determine the markets interpretation of the FOMC minutes.

If you’re feeling whipsawed you’re not alone. In March Janet Yellen’s dovish speech at the New York economic club added to the Fed’s dovish March statement causing risk assets to rally. Now the April meeting minutes show the Fed’s hawkish sentiment increased just a few weeks later at the April meeting and the press statement failed to suggest this shift in tone. Goes to show how erratic Fed communication has been.

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