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5 Feb 2016
Fed remains key theme for US dollar - BTMU
FXStreet (Guatemala) - Analysts at Bank of Tokyo Mitsubishi explained that unless we are on a cusp of the US turning drastically into recession, monetary policy divergence that had underpinned USD strength between 2013-15 is still relevant a theme into 2016.
Key Quotes:
"...as the other G3 – EZ and Japan – continue to ensure policy accommodation even as the US turns more cautious on its hiking schedule. ECB has signaled that it stands ready to ease policy further in March, and BOJ became the fifth central bank in the world to institute negative interest rates, with hints of more if need be.
The momentum of gains for the USD is, however unlikely to be as aggressive as 2015 as (1) the pace of US rate hikes does not look to be as aggressive as the FED originally anticipated - 4 based on the December dot plot looks unlikely albeit also not as low as 0 based on FED funds futures pricing; most likely either 2 or 3 hikes depending on how global growth and/oil price risk pan out."
Key Quotes:
"...as the other G3 – EZ and Japan – continue to ensure policy accommodation even as the US turns more cautious on its hiking schedule. ECB has signaled that it stands ready to ease policy further in March, and BOJ became the fifth central bank in the world to institute negative interest rates, with hints of more if need be.
The momentum of gains for the USD is, however unlikely to be as aggressive as 2015 as (1) the pace of US rate hikes does not look to be as aggressive as the FED originally anticipated - 4 based on the December dot plot looks unlikely albeit also not as low as 0 based on FED funds futures pricing; most likely either 2 or 3 hikes depending on how global growth and/oil price risk pan out."