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FOMC Statement

  • #21
  • Mar 21, 2007 2:47pm Mar 21, 2007 2:47pm
Quoting merlin
the last paragraph from new statement...

In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected.

so indeed, this is a dovish statement.
How is that sentence in any way dovish? I think you'd need to get very abstract to find something dovish in this statement.
  • #22
  • Mar 21, 2007 2:47pm Mar 21, 2007 2:47pm
Hope this to help understanding...

Quote
[FOMC STATEMENT CHANGES] There are extensive changes to the FOMC statement. The most important is the disappearance of "The extent and timing of any additional firming that may be needed..." to be replaced by the dead-neutral ""Future policy adjustments will depend on the evolution" of inflation and growth. The overall impression of the rest of the statement is that Fed officials are no longer seeing the desired progress in growth or inflation. This time, "Recent indicators have been mixed and the adjustment in the housing sector is ongoing" replaces reference to somewhat firmer growth and signs of stabilization in housing back in January. Core inflation readings have no longer "improved modestly in recent months..." Now, core inflation readings are 'somewhat elevated," with continued tension between high resource use and likely moderation over time.
Quote
[THE FOMC "BIAS"] There is some debate today over whether the Fed's "bias" has changed. The ambiguity is over what exactly this short-hand term for the policy outlook means. Those who don"t think the bias has changed seem to have in mind that Fed officials still declare inflation to be their biggest worry. Those who think the bias has changed note what the statement explicitly says about policy. Given that the disagreement is over what "bias" means rather than on the actual policy outlook, fixating on whether the bias is neutral misses the point. The Fed statement now says future policy adjustment depends on developments in inflation and growth, whereas it had said "...additional firming that may be needed...." The statement also stopped noting progress in core inflation. Those are the things on which we should focus, not on whether the "bias" (a word markedly absent from official commentary) is neutral.
Wasn't about the figure and what they said. It was about how they said it and what they didn't.
  • #23
  • Mar 21, 2007 2:51pm Mar 21, 2007 2:51pm
Quoting Traex
Maybe it's just me, but I'm seeing this move as technical. And the rate statement was the spark and volume provider.
The FOMC was definitely the catalyst but I'm not so sure this move was technical/temporary. I keep getting the feeling that something is going on in the market that I (we) don't know about yet.
  • #24
  • Mar 21, 2007 3:02pm Mar 21, 2007 3:02pm
Quoting faure
The FOMC was definitely the catalyst but I'm not so sure this move was technical/temporary. I keep getting the feeling that something is going on in the market that I (we) don't know about yet.
It is "dollar down the drain" + "carries back to business" to me.

Don't know about dollar index as of today yet. But it surely broked out the support that was holding it during the last few days.
  • #25
  • Mar 21, 2007 3:16pm Mar 21, 2007 3:16pm
More to understand...

[NORTH AMERICA FX CLOSE] The Usd gave up ground strongly after the statement accompanying the Fed's no change decision omitted the key phrase "additional policy firming may be needed." Eur/Usd leapt through a 1.3350 barrier while Usd/Jpy sank back into the low 117s. The Chf and Jpy did, though, lose ground amid a strong rally by equities after the FOMC.
  • #26
  • Mar 21, 2007 3:43pm Mar 21, 2007 3:43pm
Dovish is as dovish does. Market sentiment ruled this move.
  • #27
  • Mar 21, 2007 4:59pm Mar 21, 2007 4:59pm
Quoting merlin
ok, here is what the dollar weakness is all about, specifically...

in the previous statement, that last paragraph reads...



and here is the last paragraph from new statement...


so you can see, the line "The extent and timing of any additional firming that may be needed" is not in the new one.

so indeed, this is a dovish statement.
I think this really is the crucial difference. What they are telling markets is that IF growth should realy turn down-they will react with a rate cut. It's as if they're saying they won't be caught behind the curve, which the markets should find very reassuring. The door to a rate cut has been opened...whether the Fed walks thru it is another story, but there it is.
  • #28
  • Mar 21, 2007 5:14pm Mar 21, 2007 5:14pm
Quoting NewstraderFX
I think this really is the crucial difference. What they are telling markets is that IF growth should realy turn down-they will react with a rate cut. It's as if they're saying they won't be caught behind the curve, which the markets should find very reassuring. The door to a rate cut has been opened...whether the Fed walks thru it is another story, but there it is.
Agreed... Today's move was the reaction. Now I wonder if the market is going to start pricing in next month's rate cut.
  • #29
  • Mar 21, 2007 5:22pm Mar 21, 2007 5:22pm
Quoting technamental
Dovish is as dovish does. Market sentiment ruled this move.
At 18.16.15 GMT, TradeTheNews tells me that "(FOMC) DROPS TIGHTENING BIAS". This, coupled by the market's reaction tells me that the market's interpretation of the statement is that either a rate hike is less likely, or that a reduction of the interest rate is possible. Either way, I'll follow the market.

What was interesting for me was the reactions of the crosses. Of EURCAD, EURGBP, EURJPY,EURCHF, EURAUD, the last of these pairs was the only one where the EUR didn't gain.

I would be very grateful for any experienced trader's insight as to why the EURO was the overwhelming winner in this release.

Many thanks in advance of your responses.

C
  • #30
  • Mar 21, 2007 7:05pm Mar 21, 2007 7:05pm
I'm not so sure there's a clear winner. I don't think this trade has fully reverbarated yet...
  • #31
  • Mar 21, 2007 10:25pm Mar 21, 2007 10:25pm
Quoting faure
How is that sentence in any way dovish? I think you'd need to get very abstract to find something dovish in this statement.
not really abstract at all. actaully once i saw it i had to slap myself for not seeing it right away. "The extent and timing of any additional firming that may be needed" has been removed from the statement, and not by mistake.

see this post: http://www.forexfactory.com/showpost...8&postcount=22
and this one: http://www.forexfactory.com/showpost...6&postcount=13
Relax and be happy.
  • #32
  • Mar 22, 2007 3:42am Mar 22, 2007 3:42am
Quoting merlin
not really abstract at all. actaully once i saw it i had to slap myself for not seeing it right away. "The extent and timing of any additional firming that may be needed" has been removed from the statement, and not by mistake.
see this post: http://www.forexfactory.com/showpost...8&postcount=22
and this one: http://www.forexfactory.com/showpost...6&postcount=13
Had the USD strengthened instead, people would have found a phrase in the FOMC speech to back it up. It's all rigged. Toss a coin.
  • #33
  • Mar 22, 2007 8:36am Mar 22, 2007 8:36am
Quoting PipStar
Had the USD strengthened instead, people would have found a phrase in the FOMC speech to back it up.
You may have a point Merlin but I have to agree with PipStar, it seems to me they're really scraping the bottom of the peanut butter jar to find something to explain the move.

Then again I'm not really an expert in Fed-speak. :
  • #34
  • Mar 22, 2007 8:54am Mar 22, 2007 8:54am
guys, im not expert on fed speak either, and i agree traders tend to look for ways to support the market's direction, but this one is different. the statements for the past two years have had the same line, and now it is gone. this is a clear indication that the tightening bias is gone.
Relax and be happy.
  • #35
  • Last Post: Mar 22, 2007 9:00am Mar 22, 2007 9:00am
Quoting merlin
guys, im not expert on fed speak either, and i agree traders tend to look for ways to support the market's direction, but this one is different. the statements for the past two years have had the same line, and now it is gone. this is a clear indication that the tightening bias is gone.
Agreed...

It wasn't the price that moved by itself now everybody wants to know why. It is why "big money" push in that direction. How did they read it.

FED just cannot say "buy dollar", "sell yen". So there's this "convention" of "key-words vs. what to do".

Big money is safe and Fed holds its reputation. Power and Money. Oldest story...
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