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US: Investors may be underpricing the path of rate hike expectations - TDS

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 28, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Córdoba) - Analysts from TDS, expect the US dollar to remain on a firm footing, but they have tempered its bullishness as a consequence of slower growth and uncertainty over the Fed's policy path.”

    Key Quotes:

    “The US economy has hit another soft-patch, with the recovery ending the year on weaker footing. The slowdown i n growth momentum, however, should prove temporary, driven in part by the longer than expected inventory correction and intense global headwinds. Nevertheless, TD expects the favorable underlying domestic backdrop to reassert itself over the coming months, pushing Q1 GDP growth back above the 2.0% trend pace.”

    “Concerns over falling oil prices, sluggish global growth, and widening in HY spreads have raised questions about the sustainability of US outperformance, leading investors to push out rate hikes. We therefore suspect investors may be underpricing the path of rate hike expectations (looking for just 1 more hike in 2016) and look to be positioned short front end Treasuries and long 10yr TIPS BEs.”

    “The USD has outperformed most G10 peers since the Fed's December rate hike, but much of this seems due to weakness abroad or commodity price developments. While we expect the USD to remain on a firm footing, we have tempered our bullishness as US growth has slowed and uncertainty lingers over the Fed's policy path.”
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