Fed monitor: Review - It is not the time to start talking about tapering“

Danske Research Team Danske Bank A/S

Key takeaways

As expected, the Fed kept monetary policy and policy signals unchanged. Interim meeting so there were no new forecasts or 'dots'.
Most importantly, Fed chair Powell said that "It is not the time to start talking about tapering", highlighting what we wrote in our preview: The Fed is outcome-based, not forecast-based.
The Fed is more upbeat on the economy, downgraded the risk outlook to "risks remain" (from "considerable risks") and says higher inflation is mostly due to "transitory effects".
Based on our very positive US macro outlook, we continue to see the Fed moving in a more hawkish direction later this year when more positive US macro data start to arrive. Our base case is September. We still think actual tapering will start in January 2022.
We still see US rates to move higher later in the year. Dovish fed fuels further reflation trading and the dollar will remain on weak footing near-term.

Author

Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

GBP/USD clings to daily gains near 1.3350

GBP/USD holds just in positive territory around 1.3350 on Friday as the Greenback keeps a vacillating price action. With Fed rate hike expectations easing and US markets closed for the Independence Day holiday, Cable remains on track to post solid weekly gains.

EUR/USD remains sidelined around 1.1440

EUR/USD holds on to its recent gains and consolidates around 1.1440 at the end of the week as the US Dollar lacks clear direction. In the meantime, trading conditions remain subdued, with volatility constrained by the closure of US markets for the Independence Day holiday.

Gold flirts with two-week highs, targets $4,200

Gold extends its recovery for a third straight day, advancing toward the $4,200 mark per troy ounce on Friday. The precious metal looks set to snap a four-week losing streak as softer-than-expected June US NFP data prompt investors to scale back expectations of further Fed tightening.

Crypto Today: Bitcoin, Ethereum, XRP advance amid renewed capital inflows

Bitcoin maintains its upward momentum, holding above the $61,000 mark at the time of writing on Friday. Major altcoins such as Ethereum and Ripple are also posting gains, signaling a modest uptick in market sentiment and renewed risk appetite among investors.

The Iran war failed to trigger a recession. Can the US economy keep defying expectations?

Nearly four months after the start of the Iran war, the US economy remains remarkably resilient. While the conflict initially triggered a severe disruption to global energy markets and a sharp rise in Oil prices, recent diplomatic progress between Washington and Tehran has eased concerns about a prolonged supply shock.

Kevin Warsh offers no policy clues: Why markets still got their answer

Financial markets came to Sintra looking for clues about the Federal Reserve's (Fed) next move. They largely left with confirmation that Fed Chair Kevin Warsh intends to make those clues much harder to find.