Saxo Bank states about impact of US Fed’s decision on dollar rate

A probability of a Federal Reserve System (Fed) rate hike is 25 percent or higher, John Hardy, head of FX Strategy / Saxo Bank, said March 16.

“We see the focus swing to Federal Open Market Committee meeting where the market is looking at very low odds of a Fed rate hike (about five percent) while we might suggest the odds are 25 percent or higher,” he said, while answering Trend’s request.

The expert said that after all, every issue dogging the markets and therefore the likelihood of Fed rate hikes has eased and eased dramatically.

“The USD is weaker, commodities stabilised and even rallied, EM currencies did the same, and financial conditions (risky assets in particular) have improved dramatically,” the expert said.

“There’s still a low probability of a Fed hike, but it’s possible and we at least lean to the view that the Fed keeps the path of anticipated hikes higher than the market is currently pricing – if this view is realised, it might be the most supportive of the greenback versus commodity and risky currencies,” the expert said.

A Fed meeting will be held March 16. A decision on Fed rate will be announced there. According to the experts, there’s still a low probability of a Fed hike.

The Federal Open Market Committee raised the rate up to 0.25-0.5 percent per annum from the record low level of 0-0.25 percent in December 2015 following the meeting for the first time since June 29, 2006.

According to the US officials’ forecast on further development of monetary policy, the rates can be increased by four times in the US in 2016. According to the Fed management’s prevailing expectations, the rate can be increased up to 1.4 percent by late 2016.

But despite this, the rates remained at the same level during the Fed recent meeting in late January.

Source: TREND