FX Week 23 March 2014

Macro fundamentals reassert


After a few weeks spent focused on geopolitical issues and emerging markets, G4 macroeconomic fundamentals reasserted themselves in the currency markets last week with the USD getting a lift from the Fed’s latest FOMC meeting. As well as reducing QE by a further USD10bn per month, taking monthly asset purchases to USD55bn, the main takeaway from the latest FOMC meeting was that interest rates could rise faster than previously expected. Markets appear to have taken their cue from the updated forecasts contained within the Summary of Economic Projections. Indeed, the median forecast among officials now sees the Fed funds rate at 1.0% at the end of 2015, compared to 0.75% previously, while projections for end-2016 increased to 2.25%, from 1.75%. Forecasts for unemployment were also revised down slightly, while the inflation profile was revised up, and growth was seen slightly firmer.

To know more click here PDF