Fomc

Hi All...

I would respectively like to solicit your opinion.

With ALL the info coming out about the FOMC rate increase I think I have info OVERLOAD!!!

IF another ¼% is taken will that generally have a tendency to weaken the dollar or strengthen the dollar?

I have seen and read conflicting reports...

Thanks

sando

If the increase is 0.5% then the dollar should make some big gains. If the increase is 0.25% and some hawkish talk, then the USD should make some good gains. If the increase is 0.25% with a dovish tone then the dollar may weaken or remain roughly the same.

...more gains for the dollar? Am looking forward to that possibility

Is there a chance that the immense amount of pre-release hype has already pushed it as far as it could/should go?

(hello to everyone at forexfactory, btw - loving the site)

Most probably a 25 bp rate hike will not have an effect in itself, as it is already priced is. The question is the rhetoric of the announcement. If it suggests further raises, the dollar can strenghten. There is not much room for dollar strength though, as another 25 bp hike for August is already pretty much priced in, too.

I am expecting dollar strengthening from the rate announcement but prepared for a larger movement either up or down when the FOMC speaks afterward. Market players will be looking for any direction for the August interest rate decision. The FOMC speech will be confusing and will be open for debate as the words are presented so be careful here.

I disagree. I think a 50Bps rate increase would cause a sell off. The only reasonalbe assumption that can come from a 50Bps increase is that the FED now intends to pause and watch. That in itself suggests a slowing economy and not a good prospect for investment.

25Bps would signal continuing growth with the strong possibility that another will come in the next quarter. That's what the market likes.

i wouldnt take this week's price action too seriously. everyone is just positioning for the statement. the 25bps is built in, of course you can see that from fedfund futuers. the price action tomorrow afternoon and friday will tell a more important tale, as those who made the wrong call exit their positions, and those that are correct get greedy.

in regard to the 50bps raise, i can not see that happening. bernanke would not suprise the market like that, he is big on being easily interpreted by the market.

btw, i must have missed the news...what is causing people to talk about 50bps?

"Hope"

They've had analysts on CNBC for two weeks claiming that the FED would/could precede a pause by capping rates with a 50 BPS.

Plus there were FOMC members who suggested a 50 point increase in the last minutes that were released.

I would agree... if there is a 50 bps increase, there should be a knee jerk reaction. The dollar will want to strengthen but ultimately, people will see that kind of increase as a signal of the end.

A 50 bp increase is highly unlikely....If Bernanke did so, the stock market will sell off like hell....The bonds will drop like a rock as well...This might cause some panic & pessimism in the market which is really not needed at this specific time...


Thanks,

Nader