Timiraos + Daly = A message not to ignore

[forex4you]

Timiraos + Daly = A message not to ignore

<p>The Timiraos article earlier might have been a leak, or maybe not. The Fed clearly leaks to him but the text of the article wasn't as aggressive as the article.</p><p>But Daly removed any doubt. She arrived on the wires with unscheduled comments and a clear dovish message. Tomorrow is the Fed blackout and this is clearly a coordinated message to push back against the market pricing in too much tightening.</p><p>That's filtering through the market more dramatically now with the dollar sinking, yields falling and the S&P 500 up 1.5%. The termina Fed funds top is back to 4.85% from 5.03% yesterday. Daly spelled it out saying 4.50-5.00% should be seen as the top and that the SEP is still valid.</p><p>Previously, Daly had been toeing the hawkish line but she's sounding much more dovish now. She has carried water for Powell in the past and I have little doubt that she's doing the same thing again today.</p><p>Why do this?</p><p>Powell was worried that letting markets price in 75 bps again in December and a higher terminal top would result in him having to push back against that later, setting up an even-bigger shift. In addition, the Fed might have been getting uneasy about a 30 bps move in 10s in three days along with a soaring US dollar. There's no doubt that foreign officials were also undoubtedly calling the Fed worried about currency depreciation.</p><p>In short, this is not a message to ignore. At the same time, I don't think there's too much more left in the move. Bonds have already reversed. Stocks could run further and the dollar-long trade is crowded but the alternatives aren't exactly appetizing.</p>

                This article was written by Adam Button at forexlive.com.

Source: Timiraos + Daly = A message not to ignore

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