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16 Sep 2013
Flash: GBP/USD 8 months highs on Fed Chair selection – BTMU
FXstreet.com (London) - GBP/USD is at monthly highs in the wake of a broad dollar sell off, again, while it remains unclear to markets, again, as to what the Fed has in store in relation to timings of tapering. Lee Hardman, Currency analyst at The Bank of Tokyo-Mitsubishi UFJ offers comments in relation to the dollars weakness.
Key Quotes:
“It remains unclear whether President Obama will now choose FedVice Chairman Yellen having apparently overlooked her in favour of Lawrence Summers, and may instead now turn to an alternative compromise candidate”.
“The list of potential compromise candidates suggested includes former Fed Vice Chairman Donald Kohn, former Treasury Secretary Tim Geithner, former Bank of Israel Governor Stanley Fischer and Co-Chairman of the Committee for Economic Development Roger Ferguson”.
“Overall, these alternatives will likely be viewed as less dovish than Fed Vice Chairman Yellen. The dollar is likely to remain under downward pressure heading into this week’s key
FOMC meeting on the 18th September given the risk of a dovish surprise in the form of no QE tapering or a strengthened commitment to low rates”.
“However with the US dollar already trading weaker than implied relative to short-term yield spreads, the scope for further US dollar downside in the near-term still appears limited”.
“We still expect a pick up in US economic growth and improvement in labour market conditions heading into year end to
support a US dollar rebound unless there is a significant dovish surprise from the Federal Reserve”.
Key Quotes:
“It remains unclear whether President Obama will now choose FedVice Chairman Yellen having apparently overlooked her in favour of Lawrence Summers, and may instead now turn to an alternative compromise candidate”.
“The list of potential compromise candidates suggested includes former Fed Vice Chairman Donald Kohn, former Treasury Secretary Tim Geithner, former Bank of Israel Governor Stanley Fischer and Co-Chairman of the Committee for Economic Development Roger Ferguson”.
“Overall, these alternatives will likely be viewed as less dovish than Fed Vice Chairman Yellen. The dollar is likely to remain under downward pressure heading into this week’s key
FOMC meeting on the 18th September given the risk of a dovish surprise in the form of no QE tapering or a strengthened commitment to low rates”.
“However with the US dollar already trading weaker than implied relative to short-term yield spreads, the scope for further US dollar downside in the near-term still appears limited”.
“We still expect a pick up in US economic growth and improvement in labour market conditions heading into year end to
support a US dollar rebound unless there is a significant dovish surprise from the Federal Reserve”.