27 Jan 2015
US 1-yr rates might move higher if Fed to stick to its course – SG
FXStreet (Barcelona) - Kit Juckes of Societe Generale, comments that it the FOMC sticks to its course, the 1-yr forward rates might re-test 1.40%, further expects Fed to allow longer-term rates to anchor and short-term rates to move upwards.
Key Quotes
“The big event of the week looms ahead: US 1-yr rates, 1-yr forwards are priced at 1.13% today, which looks like no-man's land. If the FOMC maintains its current path, indicating that all things being equal rates will rise in 2015, that rate is likely to re-test the end-Dec high at 1.40. If the Fed backtracks at all, we'll be back below 1%. The dollar will take its cue.”
“We still expect the FOMC to stick to its course, allowing shorter-term rate pricing to adjust upwards while anchoring longer-term rates. The 1-year rate, 5-years forwards, is back at 2.3%, where it was before the Taper Tantrum in 2013.”
“Trading higher US rates however, is better done here, via the commodity-bloc currencies. A soft Australian CPI figure overnight (we expect 1.6% y/y) could see AUD under pressure, while any dovishness from the RBNZ tomorrow evening could see NZD fall too. And if US equities are not spooked, a front-end move in US rates could send USD/JPY back up to the top of its range too. There has been little attention on the yen of late.”
Key Quotes
“The big event of the week looms ahead: US 1-yr rates, 1-yr forwards are priced at 1.13% today, which looks like no-man's land. If the FOMC maintains its current path, indicating that all things being equal rates will rise in 2015, that rate is likely to re-test the end-Dec high at 1.40. If the Fed backtracks at all, we'll be back below 1%. The dollar will take its cue.”
“We still expect the FOMC to stick to its course, allowing shorter-term rate pricing to adjust upwards while anchoring longer-term rates. The 1-year rate, 5-years forwards, is back at 2.3%, where it was before the Taper Tantrum in 2013.”
“Trading higher US rates however, is better done here, via the commodity-bloc currencies. A soft Australian CPI figure overnight (we expect 1.6% y/y) could see AUD under pressure, while any dovishness from the RBNZ tomorrow evening could see NZD fall too. And if US equities are not spooked, a front-end move in US rates could send USD/JPY back up to the top of its range too. There has been little attention on the yen of late.”