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21 Apr 2015
What triggered the USD bulls? – BBH
FXStreet (Barcelona) - The Brown Brothers Harriman Team discusses the two key catalysts behind the Dollar’s upside climb noting that the US dollar is broadly firmer, extending yesterday's gains but remaining well within ranges that have confined the greenback for more than a month now.
Key Quotes
“First NY Fed President Dudley reaffirmed the idea that the Federal Reserve has a tightening bias. It is looking to raise rates. It wants the data to provide a suitable opportunity. He still sees Q1 weakness as largely transitory and anticipates such an opportunity to arise later this year. This means that soft Q1 data or even April data will not be a key determinant of Fed policy in late Q2 or Q3. A strong employment report in early May could spur a sharp swing in the pendulum of expectations, which we suspect has swung too far against lift-off this year.”
“Second, the combination of ongoing asset purchases and the heightened concern about a Greek default and exit continue to depress rates and to weigh on the euro. This is happening despite signs that the cyclical recovery is taking hold. Today, for the first time, three-month Euribor has slipped below zero, and Spain sold a three-month bill with a negative yield.”
Key Quotes
“First NY Fed President Dudley reaffirmed the idea that the Federal Reserve has a tightening bias. It is looking to raise rates. It wants the data to provide a suitable opportunity. He still sees Q1 weakness as largely transitory and anticipates such an opportunity to arise later this year. This means that soft Q1 data or even April data will not be a key determinant of Fed policy in late Q2 or Q3. A strong employment report in early May could spur a sharp swing in the pendulum of expectations, which we suspect has swung too far against lift-off this year.”
“Second, the combination of ongoing asset purchases and the heightened concern about a Greek default and exit continue to depress rates and to weigh on the euro. This is happening despite signs that the cyclical recovery is taking hold. Today, for the first time, three-month Euribor has slipped below zero, and Spain sold a three-month bill with a negative yield.”