Back
24 Feb 2015
Short JPY into Yellen’s speech – SG
FXStreet (Barcelona) - Kit Juckes of Societe Generale, expects Yellen to aim to get markets to start pricing in the start of the rate-hiking cycle in today’s testimony , further preferring to stay short JPY into the speech.
Key Quotes
“… I would suggest that she aim to get the market to price in the start of the rate-hiking cycle so that a move away from the zero-bound can be achieved with as little market turmoil as is feasible after such a long period in monetary policy la-la-land, while at the same time providing reassurances about the pace and extent of the rate-hiking cycle so that the market prices in an incredibly modest pace of hiking.”
“A decent start would be to ‘ditch the dots' and stress that there is no particular sense of where rates will end up.”
“This rate-hiking cycle is starting too late in the economic cycle anyway, for there to be much hope that the peak in Fed Funds is as high as any guesstimate of ‘neutral' policy, so the Fed Chair could do worse than talk down the significance of the dots and the whole idea of neutral policy.”
“… a bias to prepare the ground for rate hikes while talking down the pace and peak in rates would see the front end of the US curve react, but keep the long end sufficiently anchored to avoid repercussions in equity markets, in particular.”
“On that basis, I would like to be short JPY into the Testimony, and like long GBP/JPY from here tactically.”
Key Quotes
“… I would suggest that she aim to get the market to price in the start of the rate-hiking cycle so that a move away from the zero-bound can be achieved with as little market turmoil as is feasible after such a long period in monetary policy la-la-land, while at the same time providing reassurances about the pace and extent of the rate-hiking cycle so that the market prices in an incredibly modest pace of hiking.”
“A decent start would be to ‘ditch the dots' and stress that there is no particular sense of where rates will end up.”
“This rate-hiking cycle is starting too late in the economic cycle anyway, for there to be much hope that the peak in Fed Funds is as high as any guesstimate of ‘neutral' policy, so the Fed Chair could do worse than talk down the significance of the dots and the whole idea of neutral policy.”
“… a bias to prepare the ground for rate hikes while talking down the pace and peak in rates would see the front end of the US curve react, but keep the long end sufficiently anchored to avoid repercussions in equity markets, in particular.”
“On that basis, I would like to be short JPY into the Testimony, and like long GBP/JPY from here tactically.”