Over the weekend, two news attracted the attention of the market community.
On Friday night it was announced held on April 11 at 11:30 am New York unscheduled meeting of the US Federal Reserve. On the agenda - credit limits and discount rates.
Then it became even more interesting - in the evening on Sunday, followed by another surprise announcement that Barack Obama and Joe Biden will meet Monday with Janet Yellen "at some time in the afternoon."
Statement by the Press Service states:
"In the afternoon, the President will meet with the head of the Federal Reserve Janet Yellen, in order to discuss the state of the US and global economies, reform of Wall Street and the long-term economic prospects. Also present will be the vice president. "
Thus, the right to an extraordinary meeting of the Federal Reserve Janet Yellen will go to the meeting with the president and vice president.
Just as extraordinary meetings are not going to. Note that the last time such an unscheduled meeting of the Federal Reserve held November 21, 2015 - less than a month before the beginning of a new historical cycle of rate hikes. Obviously, it discussed the technical details of the rate increase and the possible reaction of the market.
I do not expect any clear communiqué on the results of these meetings, although, of course, some decisions will be taken on them.
Speculate - a thankless job, but nevertheless I would venture to suggest that today's meetings will be decided the fate of the dollar.
The fact that the dollar, so to speak, caught between a rock and a hard place.
On the one hand, Japan and Europe are willing to strengthen the dollar, on the other hand, China, the national currency is virtually pegged to the US dollar, it is now willing to weaken the world's main reserve currency.
One of the most popular topics of discussion in recent weeks has been the topic - whether there was or was not a conspiracy at the summit in Shanghai in February, in which the G20 and their central banks have agreed to push the dollar down to the benefit of China and Japan, and by a united Europe.
In two of his recent statements, the head of the Office of the Japanese Government Suga actually acknowledged the existence of the agreements.
In particular, in an interview with Reuters, he said that the G20 agreement to avoid competitive devaluation of currencies "does not mean that Japan can not intervene in response to the continuous movement of currency in the same direction."
These statements can be interpreted in different ways: as strong verbal intervention, or as a "last warning".
But so far, judging by the sluggish reaction of USDJPY, the markets do not listen to warnings.
Fed officials statements about the dollar in recent weeks have also been very inconsistent.
On the one hand, the speech of the head of the Federal Reserve were very soft in tone and lead to a weakening of the dollar. On the other hand, the performance of other members of the HIF indicates that the US economy is doing well, and that this year still have to wait one or two rate increases have been positive for the dollar.
It is remarkable how much the forecasts of members of the Federal Open Market Committee interest rate relatively different from market expectations.
According to the latest forecasts, the HIF expect two rate increases this year.
At the same time, as the CME Group Fedwatch indicator, the market assesses the likelihood of a rate increase in 2016 to 58.9%.
I would venture to suggest that Japan has in recent days to exert strong pressure on America, demanding to take action (at least at the level of the officials statements) that would stop the unrestrained strengthening of the Japanese yen.
Without the help of America, Japan is not able to deal with the strengthening of the Japanese yen. And I'm confident that America will help her!
Overdue political solution, and it will be accepted. Take it would not be easy, because the data on the economy is poor and GDP forecast for the first quarter of the Federal Reserve Bank of Atlanta (GDPNow) after data on investments in stocks of April 5 fell from 0.4% to 0.1%.
But, on the other hand, the US stock market has fully recovered after falling earlier in the year, and the reinvestment of redeemable bonds gives it a good feeding.
Do you know what happened February 29, 2016 ?
Of course, we should not wait for the Fed raising rates in April. But in June, in my opinion, the market is strongly underestimates the probability of a rate hike (CME Group Fedwatch assesses the likelihood of increasing only 21.6%).
Two members of the HIF, not "doves", a week ago, right in favor of a rate hike in June.
So, today, behind the scenes it is decided the fate of the dollar, and the decision will be positive for him.
First of all, it involves a pair USDJPY (in more detail, I will focus on it in one of the next articles). USDJPY for the meeting of the Bank of Japan April 28 will return to the area for at least 111-112. But the dollar will rise, and with respect to other currencies.
A pause in the global strengthening of the American currency, which began in 2012-2013, comes to an end.Ahead of a new cycle of strengthening of the dollar!
Author: Nicholas Ludanov Source