From Marc Chandler at Bannockburn Global Forex:
The initial reaction to the Federal Reserve rate hike was to take US rates and the dollar higher, even though the hike was well anticipated. In addition to the dots, which showed 16 officials see another hike as likely being appropriate this year compared with six in June, Chair Warsh’s characterization of the hike as “removing a dose of accommodation” was understood as a hawkish assessment, i.e., policy is still accommodative. However, the market still seems more hawkish than the Fed and has three more hikes discounted over the next 12 months. Still, US rates are a little softer today and the dollar is consolidating. A few weeks away from the presidential election, Brazil’s central bank cut the Selic rate by 25 bp to 13.75%, but there is little precedent for the US to change policy so close to its election, which seems to rule out another hike next month, though the Fed funds futures have slightly more than a 50% chance of it.
As expected, the Bank of England held steady (6-3 vote), but indicated a rate hike is coming. The swaps market expects a move at the next meeting in November and the possibly (~2/3 chance) of another hike before year-end. Attention shifts to tomorrow’s Bank of Japan meeting, where a hike is widely anticipated, and the door kept open to another move in Q4....
....MUCH MORE
