The FOMC is expected to lift the federal funds rate at today’s policy meeting with the ECB and BOJ policy decisions slated before the weekend.
Ben Johnston |
June 13, 2018
The dollar is holding in morning hours, hitting a three-week high against the yen before a US Federal Reserve policy announcement that investors will scan for clues on how many more rate hikes there will be this year.
“Live for yourself and you will live in vain; live for others and you will live again.”Bob Marley
June 13, 2018
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There is no question the Fed will increase short-term rates by another 25bps which would bring the target band to 1.75%-2%. However, investors remain cautious amid uncertainties regarding a potential shift in expectations for future policy. FOMC members are due to provide updated economic and financial forecasts. President Trump confirmed his intention to stop military exercise with S. Korea while the negotiation with N. Korea is in progress.
The pound is sliding on news that UK PM May is in a frantic search for a compromise to unite the opposing Brexit factions in her ruling Conservative Party before they derail the government. May is racing against the clock on Brexit and fighting battles on multiple fronts. The UK will leave the EU in March next year, but talks in Brussels are struggling to make headway. The slow progress is in part because the premier can’t get her cabinet to agree on the kind of post-Brexit trade regime they want the UK to have with the EU.
The euro is trading in a range and awaiting direction as we head into the FOMC meeting today and the ECB meeting tomorrow. Speculation that the ECB could signal its intention to unwind its massive bond purchasing program in 2018 lifted the euro to a three-week high of $1.1840 last week and has prompted some strategists to become more bullish on the euro.
The loonie has maintained its decline following two straight days of losses ahead of today’s FOMC decision, with markets focused on the outlook for future U.S. monetary policy given that a hike at the current meeting is priced as almost certain. The BoC meets next month with the probability of rate hike steady at 70%. There is is no major market-moving data set for release in Canada.
Yen is weaker for a 3rd day against the dollar as investors price in the possibility of four rate hikes by the Fed this year. AUD and NZD are both higher against the dollar amid uptick in risk appetite, while China eases controls on coal imports and seemingly commits to import more healthcare products, while banning some new steel capacity.
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|Source: Bloomberg 2017|
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About the Author
Ben Johnston is a foreign exchange advisor for Silicon Valley Bank’s global financial services group, based in Boston, MA. He specializes in developing niche-specific risk management and process optimization strategies for Silicon Valley Bank's Private Equity and Venture Capital clients, including exposure identification, risk management, policy development and tailored product strategy. He has over nine years of experience in the banking industry, including portfolio management roles at Sovereign Bank/Santander and Silicon Valley Bank.
He holds an undergraduate degree of Finance & International Economics from Bentley University.
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