Recap 2014-09-17


The hawkish dots on the SEP offset the retention of the ‘considerable period’ language. US 5y real yields hit the highest level since 2011, which was also a catalyst for a move in the USD. USDJPY is now up 7 figures in 2 months, with about half of that due to EURUSD. I wrote an extended piece discussing a major USD bull market on 7/31, but I’m still surprised by the strength of this move. To be sure, it isn’t all driven by the US – the recent and concurrent easing by the ECB, the ramp up of expectations for more BoJ easing, and the drop in oil prices (which has taken the US current account to its lowest level since 1998) have played a role as well. It wouldn’t be surprising to see some consolidation for a bit, but the longer term trend looks intact. The ECB will be conducting additional easing via the TLRTOs next month, markets will be looking for whether the FOMC keeps the ‘considerable period’ language at every meeting now, and unless Japanese inflation miraculously ramps up, markets will expect additional easing.

Anyway, interesting note from @IanShepherson that the dot drift higher has been going on for some time now: (although the long run dots have been coming down… as people with flatteners on have been happy to see. Also note that in 2015, the 4 regional voters will turn more dovish. Instead of Fisher/Plosser/Mester/Kocherlakota, we’ll get Lacker/Lockhart/Williams/Evans … essentially we’ll lose one hawk and get a dove to replace him)

@CSresearch notes that


  • FOMC Statement maintained the ‘considerable period’ language, but the median dots move up notably – by 37.5bps in 2015 and 50bps in 2016. However, the long run expectation did not change. Economic projections were stable to slightly stronger.
  • US CPI declined to 1.7% vs 1.9% exp and 2.0% prev. The core measure was also weak, declining to 1.7% vs 1.9% exp and prev. There was a large 4.7% drop in airline fares that was a key driver. OER is rose 2.7% YoY.
  • NAHB Housing Index improved to 59 vs 56 exp and 55 prev. This was the highest print since 2005.
  • BoE Minutes: For most members … unit labour costs were currently growing at a rate well below that consistent with meeting the inflation target in the medium term
  • UK Employment was strong, with the ILO measure falling to 6.2% vs 6.3% exp and 6.4% prev. Jobless claims declined -37.2k vs -30k exp and -33.6k prev
  • EU inflation was revised up to 0.4% YoY from 0.3% for Aug


  • Wed: NZ GDP
  • Thu: UK Retail Sales, ECT 1stTLRTO, US Jobless Claims, Housing Starts, Philly Fed
  • Fri: Quadruple Witching, Canada CPI
  • Mon: US Existing Home Sales, EU Consumer Confidence, Dudley speaks, HSBC China Mfg PMI
  • Tue: EU PMI, US FHFA House Price Index, US Markit Mfg PMI, Japan Mfg PMI