Well Anchored


The Fed hiked. The RBNZ stood pat. Higher inflation reported in the Eurozone and UK. After an initial confusion surrounding the Fed statement's dropping of the the word "accommodative", the wind is behind the Greenback.

Typically the Fed doesn't like to the rock the boat and spook the market. Too much of the world's debt is dollar-denominated. It is usally safe to buy commodity currencies (AUD, NZD, CAD) if they strike a balanced tone. That was the market's initial take. But this morning the AUDUSD is almost 100 points lower than its inital Post-Fed high of $0.7312.

I had a chance to re-watch Powell's testimony and it has given me more comfort at being long dollars.

Some notes I highlighted:

"...every voting member sees a natural rate above where fed funds is now ...so whether we keep that natural rate and exceed it a few times or raise that rate ..."
"...we are still accomodative ..."
"inflation is well anchored in the long run"
"employment is high, wages are rising; banking system is much stronger"
"true, asset prices are in the upper end of their ranges but it is moderate"
"impact of a trade war could be dire...rising chorus of concern about impacts on trade all around the country...""
"loss of business confidence could reduce investment"
"in longer run, where is this going...trade supports productivity and higher incomes...fair trade can be a good thing"
"widespread tariffs in place for a long time and reduction in trade is bad"
"...a particularly bright moment if you look back over the past decade...""
Reporter comment, 'WMT, KO, GPS, GM all expect tariffs to affect the price of everyday goods'...
"until we see it in the numbers it's hard to react"
"we don't see it yet"
"a lot of talk of supply side constraints"
"'accomodative'...its useful life was over - we put that in the statement in 2015, it no longer says anything important about the way the committee is thinking about the economy."

Current thoughts are long USD/CAD and USD/JPY.
$1.3065 looks like a 50% fib from May low of $1.2750 and June high of $1.3386.
USD/CHF seems now firm above 0.9700.

It's well anchored. Let it Ride.