Daily thread to exchange ideas and to share your thoughts
Is this a start of a major turning point for the Fed and the dollar? Perhaps.
If anything, the market has never been a good judge of that but the Fed surprise yesterday certainly could be one that we look back at as a pivotal shift in the narrative that tapering is coming sooner rather than later.
There is some argument that the response is one that should be short-lived, given that the main guidance on rates has not changed whatsoever.
Adding to that is the fact that these so-called projections are still long ways to go and a lot can change up until then - especially on the inflation front.
That said, policymakers are making it clear that they are growing more hawkish by the day as long as there aren't any major hiccups along the way.
That is something to be optimistic about and for the dollar, that may at least provide some comfort - even if in the short-term - until something changes.
However, the rest of the world isn't just resting on their laurels. The BOC and RBNZ are also shifting towards a hawkish stance, with the BOE also not too far behind. The Fed may be big in terms of importance but they are not leading the charge here.
I'm still reserving judgment for the dollar for the most part as I would argue that bets on the loonie and pound are still more favourable - at least for now, especially against the franc and yen in the long-term.
I don't quite think this is what sets off the dollar trade that we experienced back in 2012 where it was just sell everything and buy the greenback.
But we will likely eventually get there and it seems that day is one that is moving closer with every passing day.
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