Societe General after the FOMC decision
The FOMC voted 7-3 to keep rates on hold, deciding to wait for more data before raising rates. The chances of a single hike in 2016 coming in December have increased. The chances of rates getting above 2pct before the next recession were already remote and even the Fed's 'dot-plot' projection is moving that way.
The announcement constitutes a 'hawkish hold' in line with market expectations. Moving the projected path of rates down towards, but still well above, what is priced into markets doesn't signal anything to me, but that's cited by some as a reason for the market reaction - lower 10-year Treasury yields, and a strong risk rally.
To the extent real and nominal Treasury yields are lower, the market reaction makes sense. It's just that I don't get why real yields should head back down. But there's no point quibbling. Rather, I think there's an opportunity, taking the move down in treasury yields post-FOMC, to go long USD here, around 100.30, with a tight stop (99.00) on the grounds that I just don't think we can push TIIPS yields, in particular, much lower.
Of course there's a danger of a position flush below 100 but I've blathered long enough about the case for a medium-term long USD/JPY and this is an opportunity to get on with it.
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