Forex news for December 17, 2014:
FOMC/Yellen
- FOMC removes ‘considerable time’ from guidance, replaced with ‘patience’
- FOMC says ‘patience’ is consistent with ‘considerable time’
- Full text of the FOMC decision
- Fed doesn’t believe it will begin the normalization process [hike rates] for ‘at least the next couple of meetings’
- Market-based measures of inflation expectations likely to be transitory
- All FOMC members expect lift off in 2015
- FOMC is not considering an overshoot of its 2% inflation target
- FOMC forecasts: Fed leaves 2015 GDP unchanged, sees inflation lower
More news
- US November CPI 1.3% y/y vs 1.4% y/y exp
- Ex-food and energy 1.7% vs 1.8% y/y
- ECB’s Coeure says there’s a broad consensus that we need to do more
- Obama announces ‘major overhaul’ of US policy towards Cuba (details)
- Q3 2014 US current account balance -100.26bn vs -97.5bn exp
- October 2014 Canadian wholesale trade sales 0.1% vs 0.1% exp m/m
- SNB Q4 2014 bulletin – Reaffirms minimum exchange rate
- Russian central bank imposes temporary moratorium on portfolio revaluation
- First Greek vote for President fails 160-135
Market moves:
- Russian ruble gains nearly 10%, USD/RUB at 61.81
- S&P 500 up 40 points, or 2%, to 2012
- US 10-year yields up 7 bps to 2.13%
- Gold down $9 to $1187
- WTI crude flat at $55.88
- USD leads majors, JPY lags
The short version of the FOMC statement: We removed ‘considerable time’ but ‘patience’ means the exact same thing as ‘considerable time’.
There were three moves after the Fed statement:
- Buy the US dollar because ‘considerable time’ was gone
- Sell the US dollar because the statement was re-worded in a way that ‘considerable time’ was basically still there
- A massive wave of real money US dollar buying
The final point is debatable. You could argue the Fed was more hawkish, especially the line about all Fed members seeing liftoff in 2015 but the rates market (Fed funds) shifted more dovishly so I don’t buy it. I think there was a lot of money on the sidelines waiting for the Fed to get out of the way to pile into US dollars and that’s what I think we saw.
At the end of the day, the final move was all that mattered and USD/JPY surged 215 pips ton the day to 118.57. Much of it came before the decision as Russia and emerging markets improved. The Cuba news was positive but was only a small factor.
The euro broke down on Coeure’s comments in the strongest hint of sovereign QE yet as he said it was the ECB baseline. Overall, EUR/USD fell as low as 1.2321 and hardly bounced.
An epic short squeeze hit oil prices with Brent up 5% at one point but all the gains evaporated and Brent finishes up just 69 cents and WTI was flat.
