Monex: Powell zet nieuwe standaard voor hoe hawkish een renteverlaging kan zijn

Aug 1, 2019

Hieronder volgt een commentaar in het Engels van Bart Hordijk, valuta-analist bij Monex Europe, op het rentebesluit van de Fed.

Jerome Powell has bought a sharp dose of reality to markets by pushing back against expectations of a steep and deep cutting cycle, confirming that the Fed is nowhere near as dovish as consensus. The key sentence statement was that this is a “mid-cycle adjustment” and not the beginning of a predetermined move towards substantially looser policy.

Today was also a victory for central bank independence as Powell successfully justified the FOMC’s actions as clearly driven by the medium-term outlook and global risks as opposed to a desire to juice the equity markets or satisfy Trump.

Emerging market currencies will need to watch out below as a less dovish Fed will blunt investors’ appetite for yield and expose riskier currencies that have had idiosyncratic weaknesses ignored in a low yield environment. This includes the Turkish lira, and also sterling.

With the threat of a big easing cycle dented, the dollar is once again left as the king of real yields and therefore the dominant global currency. Although Trump has been calling for rate cuts, today sets the dollar up for another period of strength, particularly against the euro and of course the pound which continues to be battered by Brexit risk. How the administration responds to another leg of dollar strength is another question entirely - after the global slowdown caused by US-China trade tensions, the risks of a currency war started by the White House would be immense.