18 November, AtoZForex.com, London – Published on Wednesday, the minutes from the FOMC 28th of October meeting were crystal clear for BNP Paribas analysts, thus they have provided FOMC minutes summary.
Without an unanticipated shock that adversely affects the economic outlook, the Fed will raise rates in December, notes BNP Paribas.
Although there was some concern that the weakness in the US Non-Farm Payrolls would prove more persistent following the August and September prints, the concern was likely dismissed after the stellar job growth in October along with increase in Average Hourly Earnings m/m at 271k and 0.4% accordingly.
Overall the FOMC meeting minutes were in line with BNP Paribas consensus, expecting “a balanced tone ahead of October’s employment report and a clear signal that the Fed is ready to raise rates.”
EURUSD into December
Strength of the USD has driven EURUSD this week to the new lows of the second half of 2015.
“The overall backdrop remains conducive to further broad USD upside in our view with EURUSD appearing on track to reach its year-lows around 1.05,” BNP Paribas notes.
As currently Euro trades near 1.066, this imply a further 160 pip downward move ahead of the December ECB and Fed meeting at 3rd and 16th accordingly. Both central banks are widely expected to widen the monetary policy divergence further, with the ECB expected to continue the monetary easing by prolonging the ongoing QE program and cutting the deposit rates and the Fed raising interest rates for the first time in almost a decade.
However, BNP Paribas argues that the majority of bearish EURUSD momentum has already taken place, resulting in a phenomenon of “buy the rumor, sell the fact.”
“With ECB easing and Fed rate hikes likely to be increasingly fully priced by that point, there is scope for an on-the-fact rebound and we maintain our year-end target at 1.06.”
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