Sean Callow, Research Analyst at Westpac, suggests that market pricing for the Dec rate rise is little changed over the week, around 70%, but doubts over 2019 have grown.
Key Quotes
“There has been renewed market discussion about the Fed delivering less than the 3 hikes of the median FOMC “dot plot” for end-2019. To be fair, 3 hikes in 2019 is a fragile median, with 7 members looking for less, as of Sep. But market pricing for just 54bp of tightening by end-2019 is quite aggressive.”
“Supporting the dovish case has been a deceleration in US economic momentum.”
“The US dollar’s best hope near term might be speeches by Fed VC Clarida on Tue and especially Chairman Powell on Wed. Unless they are emphatic that softer data momentum, tumbling oil prices and tighter financial conditions (corporate bonds, equities etc) are unlikely to impact on monetary policy over the year ahead, USD should be on the back foot.”
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