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June FOMC rate hike still on the table – BTMU

FXStreet (Barcelona) - Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, comments that the strong US labour market report is likely to reinforce expectations for a June hike by the Fed.

Key Quotes

“The strength of the US labour market is likely to reinforce the Fed’s confidence that it can begin to gradually raise rates from the middle of this year. It will keep alive the possibility that the Fed could begin to raise rates as early as at the 17th June FOMC meeting.”

“As a result, Fed Chair Yellen’s semi-annual testimony which has been announced will take place on the 24th February and the next FOMC meeting on the 18th March will garner even greater market attention as potential signals for the timing of the first rate increase.”

“With the market still sceptical that the Fed will raise rates by the middle of this year, there is still scope for US short yields to rise further reinforcing the US dollar’s upward momentum in the coming months.”

“Low inflation and external tail risks such as a Greek default and exit from the euro-zone could still delay Fed rate hikes beyond mid-year.”

“However even if the Fed delays rates hikes, the US dollar is still likely to strengthen as overseas central banks continue to ease policy further widening the monetary policy divergence with the Fed”

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