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No Surprises From The Fed As Dollar Stays Low, For Now

By Kathleen BrooksMarket OverviewSep 26, 2018 21:03
uk.investing.com/analysis/no-surprises-from-the-fed-as-dollar-stays-low-for-now-200203848
No Surprises From The Fed As Dollar Stays Low, For Now
By Kathleen Brooks   |  Sep 26, 2018 21:03
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Initial Fed thoughts

The Federal Reserve hiked rates as expected and pointed to a further rate hike in December; however, expectations for rates in 2019 remained unchanged.

On the growth front, the 2018 GDP projection was raised from 2.8% to 3.1%, the 2019 expectation for GDP was raised a touch to 2.5% from 2.4%. However, this wasn’t enough to boost the dollar, which is currently down against its G10 peers, although no fresh daily lows have been reached.

Is the Fed dovish on the US economy?

Interestingly, if GDP is set to reach 3.1% for 2018 as a whole, it would require Q4 GDP collapsing to 1.3%, after a 4.1% rate of growth in Q2. Is the Fed actually dovish about growth in the next three months? Or could they be underestimating Q4 growth? This is an interesting question, if the Fed truly believes that growth is going to tank into the end of the year, then this is a dollar bearish report. It also raises the question about what the Trump administration can do to boost growth after the tax cut boost from earlier this year.

Could Powell and co. end up giving Trump the lower interest rates that he so desires after all?

Longer-term expectations unchanged

These latest economic projections also included figures for 2021. Expectations for growth, inflation and the unemployment rate are all unchanged for the longer run, suggesting that the Fed’s central tendency has not changed. The Fed expects GDP to fall to 1.8% in 2021,which is unchanged from the Fed’s longer run projections from June.

The dot plot is also mostly unchanged, which is one reason why we have seen whipsaw price action in the dollar on the back of this FOMC announcement. Now over to Fed chair Powell and his presser.

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

No Surprises From The Fed As Dollar Stays Low, For Now
 

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No Surprises From The Fed As Dollar Stays Low, For Now

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Comments (1)
sajjad siddiq
sajjad siddiq Sep 27, 2018 2:35
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Good analysis!
 
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