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1 Apr 2015
What to make of all this USD speech? - BAML
FXStreet (Barcelona) - Ian Gordon, FX Strategist at BofA-Merrill Lynch, remains of the view that Fed officials increasingly have discussed the USD, but overall do not seem so concerned that it will influence policy.
Key Quotes
“The frequency of Fed commentary about the USD and its strength has increased in recent weeks. But FOMC members are largely sticking to the script of the March statement and Fed Chair Janet Yellen's post-meeting press conference.”
“The message from Yellen and company is that USD strength is a risk to exports and inflation, but they do not (yet) see it as a game changer for their US growth outlook.”
“Therefore, USD strength does not seem to be having a binding impact on policy for now, suggesting the Fed is not overly concerned or trying to talk down the dollar despite the media focus on the issue.”
“Not surprisingly, Fed officials have also stuck with US Treasury Secretary Jacob Lew's mantra that USD strength is a reflection of US economic strength.”
“Combined with US policymakers' support (both Treasury and Fed) for ECB and BoJ policies (ie, QE) to support domestic demand and inflation, this implies an expectation (and acceptance) of further USD strength as a necessary condition for supporting global growth, which over the long run is good for the US.”
Key Quotes
“The frequency of Fed commentary about the USD and its strength has increased in recent weeks. But FOMC members are largely sticking to the script of the March statement and Fed Chair Janet Yellen's post-meeting press conference.”
“The message from Yellen and company is that USD strength is a risk to exports and inflation, but they do not (yet) see it as a game changer for their US growth outlook.”
“Therefore, USD strength does not seem to be having a binding impact on policy for now, suggesting the Fed is not overly concerned or trying to talk down the dollar despite the media focus on the issue.”
“Not surprisingly, Fed officials have also stuck with US Treasury Secretary Jacob Lew's mantra that USD strength is a reflection of US economic strength.”
“Combined with US policymakers' support (both Treasury and Fed) for ECB and BoJ policies (ie, QE) to support domestic demand and inflation, this implies an expectation (and acceptance) of further USD strength as a necessary condition for supporting global growth, which over the long run is good for the US.”