Greg Gibbs, Founder, Analyst, & PM, Amplifying Global FX Capital Pty Ltd explained that every Fed rate hike over the last year and more has resulted in a weaker USD, suggesting the Fed has a habit of delivering ‘dovish’ hikes.
Key Quotes:
“There is every reason to expect the same this week. The May policy minutes sent a number of dovish signals; concern over a flattening yield curve, ambivalence on the labor market and wages, concern over trade policy, a desire for a period of above-target inflation, thoughts that policy is getting near neutral, and the Fed funds creeping up to the IOER.”
“There is evidence that Fed policy tightening is causing financial stress in some emerging markets. A weaker USD may be seen as a good thing for stabilising global markets. The parallels between the weaker EM currencies and the USD (unsustainable fiscal policies, external deficits and populist strong man politicians) suggest the Fed and Congress should be preparing for their own reckoning.”
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