FXStreet (Bali) - Brian Daingerfield and Paul Robson, FX Strategists at RBS, share their views on Wednesday's FOMC, noting that no major shifts in policy are expected.

Key Quotes

"We have long felt, and continue to feel, that a change in Fed guidance and a challenge to its ability to stay credibly dovish will eventually merit a sustained uptrend in the USD. Despite recent improvements in the economic data, we simply do not feel that the FOMC will give an overt signal that their thinking is drifting in that direction at their meeting tomorrow."

"The Fed’s preferred measure of inflation, the core PCE deflator, remains well below target even as the core CPI rose to 2.0% in May. Importantly, Fed Chair Yellen has previously signaled that she sees the risks to inflation favouring inflation holding below target even as the economy recovers. Unlike the Bank of England, which showed an increased concern about rising housing market imbalances, the US Fed is more concerned about the recent stagnation in housing market activity."

"The FOMC may ultimately have to adjust its signaling language to put a greater emphasis on the slow pace and lower neutral level of the Fed Funds rate while simultaneously acknowledging that the lift-off may have to begin sooner. This “slower (rate hikes) for longer” rate hike guidance may one day replace “lower for longer”."

"In both cases, central bank dovish guidance may become more difficult to defend as the economy continues to recover. In any event, September appears a more fertile ground to plant those seeds, as it coincides with the final press conference meeting before the taper is currently expected to end. With that in mind, the late-August Jackson Hole speech may be a signaling ground for a guidance update, of course assuming that economic conditions do not vastly deteriorate during the interim."

Related Articles
  1. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  2. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  3. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  4. Investing

    Financial News Comparison: Bloomberg Vs. Reuters

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  5. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
  6. Forex Education

    The Top Uses For P2P Currency Exchange

    Peer-to-peer (P2P) currency exchange networks offer a viable and cheaper alternative for buying and selling currencies.
  7. Forex

    Steps To Open An Offshore Forex Account

    Here is a simple breakdown of how to open an offshore forex account for US-based users, including legal requirements.
  8. Entrepreneurship

    Top Forex Trading Apps

    A brief overview of the top apps that help forex traders with on time information, charts and more.
  9. Investing Basics

    The Risks Of Buying Bitcoin

    Virtual currency is probably here to stay, but what about Bitcoin specifically? Does it have a first-to-market advantage? What are the risks involved?
  10. Forex News

    How The Forex "Fix" May Be Rigged

    When it comes to forex, some types of "fixes" are legal. But some really aren't.
RELATED TERMS
  1. No results found.

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!