7 Jul 2014
Fed sounds still dovish - Societe Generale
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale, sees the case for the Fed to still keep the dovish tone.
Key Quotes
"Meanwhile, in the land of markets, we’re still ‘reacting’ to last week’s US labour market report. June's 1.84% annual rate of growth in US employment is the best since early 2012."
"Unfortunately, when employment was increasing at a 1.88% rate in Q1 2012, real GDP was growing at a respectable 3.3% y/y. The last GDP reading we have, for Q1, was at a much more modest 1.5%."
"There have been 6 quarters during the last 30 years when employment growth has outpaced GDP and 4 of those have come in the last three years. In the absence of faster wage growth, the Fed will still be in no hurry to sound less dovish, while economic activity needs to pick up significantly to convince markets that anything has changed very much."
"So, while the reaction to the strong US data has been for Treasury yields to drift slightly higher, equity indices have also made strong gains and the dollar has reacted modestly. The next item on the agenda is the release of the Minutes of the June FOMC meeting, and any sign of a more hawkish bias. More likely, we’ll watch the WC semi-finals instead and wait for early September before we get firmer wage growth."
Key Quotes
"Meanwhile, in the land of markets, we’re still ‘reacting’ to last week’s US labour market report. June's 1.84% annual rate of growth in US employment is the best since early 2012."
"Unfortunately, when employment was increasing at a 1.88% rate in Q1 2012, real GDP was growing at a respectable 3.3% y/y. The last GDP reading we have, for Q1, was at a much more modest 1.5%."
"There have been 6 quarters during the last 30 years when employment growth has outpaced GDP and 4 of those have come in the last three years. In the absence of faster wage growth, the Fed will still be in no hurry to sound less dovish, while economic activity needs to pick up significantly to convince markets that anything has changed very much."
"So, while the reaction to the strong US data has been for Treasury yields to drift slightly higher, equity indices have also made strong gains and the dollar has reacted modestly. The next item on the agenda is the release of the Minutes of the June FOMC meeting, and any sign of a more hawkish bias. More likely, we’ll watch the WC semi-finals instead and wait for early September before we get firmer wage growth."