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Citi On Possible USD Surprises From Today's Overhyped FOMC Conference

Tyler Durden's picture




 

Citi's Steven Englander looks at today's so overblown FOMC statement it is getting ridiculous now, and gives some hypotheticals that could result in some strength (lol) or further weakness for the dollar.

From Citigroup:

Today's FOMC meeting breaks new ground with the formal FOMC policy decision and statement at 12:30 followed by the Bernanke press conference at 14:15. Our economists expect that the Fed: "will complete the purchases of Treasury securities by the end of June … trim growth forecasts and raise projected inflation estimates slightly. …. a key goal of the Chairman may be to reassure the public that rising energy and commodity prices will not prove the leading edge of a persistent surge in inflation. …the Committee is not expected to alter its rate guidance or tinker with reinvestment of MBS principal repayments."

There is expected to be no enthusiasm for QE3 and no commitment on what will be done with maturing securities. This is pretty much what is priced into the market.

The somewhat more elaborate FOMC statement (vis-à-vis say the ECB policy rate announcement) and the 1 3/4 hour gap between statement and press conference may lead to somewhat more active FX price action in the interim. However, as investors have discovered with the ECB press conference, the answer to many questions may be "I have nothing to add beyond what I have already said" so those who expect a catharsis may be disappointed.

The potential USD negative surprise:

1) focus on the disappointing performance of the US economy, the downward pressure on real wages and weak levels of core inflation
2) reiteration of the view that global imbalances and inflation reflect misguided currency policies in EM
3) opening a door to QE3 if the outlook disappoints further

The potential for USD positive surprises:

1) a hard line on the fiscal situation and strong commitment to opposing any further monetization of the debt
2) any substantive concern that  commodity price increases may persist  and lead to second round inflation
3) concern on upward drift in long-term inflation expectations
4) any hint that the Fed is beginning to focus on tightening as the most likely next significant policy move
5) repetition of Treasury Secretary Geithner's strong dollar declaration (although as with the Treasury Secretary's declaration, the impact is likely to be limited at this stage).

Our CitiFX PAIN reading for EUR positioning is now at 65.82, pointing to the longest EUR positioning since early December 2010. US 2-yr yields are close to the bottom of the February-April range so it is hard to argue that investors expect anything but a somewhat dovish approach. Nevertheless, unless there is a real signal that some turn in policy is approaching, any USD buying is likely to be temporary.

 

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Wed, 04/27/2011 - 10:28 | 1211426 NOTW777
NOTW777's picture

when does bernank swear under oath again that he wont monetize

Wed, 04/27/2011 - 10:36 | 1211464 Fish Gone Bad
Fish Gone Bad's picture

The Bernank, like Geithner, and so many others, enjoy the privilege of being able to talk out of both sides of their mouths.

Wed, 04/27/2011 - 10:42 | 1211495 Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

These publically aired conferences always go to fuck. Ben sweated like a fool on 60 Minutes. They rarely look like they actually really believe the swill they shovel and the desperation and sleepless nights seep out from the micro expressions on their faces.

 

Bullish for stocks, silver, and ammo, very bearish for the unwashed masses.

Wed, 04/27/2011 - 12:24 | 1211997 ciscokid
ciscokid's picture

UWM is that you baby....

Wed, 04/27/2011 - 11:11 | 1211684 Rogerwilco
Rogerwilco's picture

Everybody talks about this but IIRC, the Fed Chairman is not under oath when testifying before Congress.

Wed, 04/27/2011 - 10:29 | 1211431 4realmoney
4realmoney's picture

What's going to happen if the dollar drops further?! Look at premiums for bullion already. Silver Eagles are selling at a premium of $5.49 already on APMEX. Tulving just bumped up his prices to $4.79! It's crazy. Look at the comparison?! It's nuts!

http://www.goldshark.com/silver/search/results.html?t=500&ms=oz&mt=silve...

Wed, 04/27/2011 - 10:37 | 1211470 SheepDog-One
SheepDog-One's picture

While PM's trade in a range tighter than bonds now, availability is nill and premiums on a $45 item are now $6 over advertised price? Banana republic.

Wed, 04/27/2011 - 10:29 | 1211432 SheepDog-One
SheepDog-One's picture

How The Bernank can throw out a positive, I have no idea. All he can do is more of the same 'while things steadily improve, monetizing everything in sight with billions daily at ZIRP must continue in extended timeline fashion'.
WTF!

Wed, 04/27/2011 - 10:37 | 1211484 DeadFred
DeadFred's picture

What do these statements mean anyway?  I think that behind closed doors someone or someones already know where they will take the dollar and after the fact the commentators will opine how Bernanke's statement was not emphatic enough or somesuch to explain the move.  But what do I know.

Wed, 04/27/2011 - 10:56 | 1211583 SheepDog-One
SheepDog-One's picture

Well maybe this press conference has nothing to with FED policy at all but reporters will put questions to Ben about beard grooming and chrome-dome polishing techniques?

Wed, 04/27/2011 - 11:59 | 1211901 Creed
Creed's picture

dollar already up mildy pre speech, the insiders are making money again

Wed, 04/27/2011 - 10:27 | 1211436 Monday1929
Monday1929's picture

Again, who cares what a failed, insolvent bank or its failed employees think?

Wed, 04/27/2011 - 10:34 | 1211452 tmosley
tmosley's picture

Only the idiots who still have their worthless paper.

And those who are paid in it.  Like me :(

Wed, 04/27/2011 - 10:28 | 1211439 SheepDog-One
SheepDog-One's picture

USD 73.7, real strong dollar policy kickin ass.

Wed, 04/27/2011 - 10:29 | 1211442 oogs66
oogs66's picture

if everyone long Eur, Big Ben comes out hawkish, and Greece actually defaults (bonds crushed again today), are we set up for a massive stock bitch slap?

Wed, 04/27/2011 - 10:31 | 1211451 SheepDog-One
SheepDog-One's picture

Well, any mere mention that the free money spigot is being turned to less flow and the whole Ponzi goes into sell mode.
They can pump on zero volume, lets see what happens when everyone places a 'sell' order. Wont be pretty with no buyers!

Wed, 04/27/2011 - 10:33 | 1211460 disabledvet
disabledvet's picture

"Fukushima" and "the explosion of a massive debt crisis at the heart of Europe."  Needless to say "those areas know a little bit about monetizing debts."  I believe it was invented in Europe actually.  But "whose debt" exactly?  I'm looking for the numbers "in this age of transparancy."

Wed, 04/27/2011 - 10:35 | 1211462 6 String
6 String's picture

Citi's Steven Englander looks at today's so overblown FOMC statement it is getting ridiculous now, and gives some hypotheticals that could result in some strength (lol) or further weakness

Well, when ZH starts pounding too hard, you just know it's about to reverse course. Therefore, it's almost a sure bet the dollar will bounce.

Wed, 04/27/2011 - 10:51 | 1211486 SheepDog-One
SheepDog-One's picture

Reverse course? Announce end of QE free money spigot and raise rates? GREAT! Go ahead, I dare ya Ben!
The Bernankes only option is to continue Maniacal Monetization policy, only idiots will be fooled by any 'hawkish talk'. Dollar goin down to Chinatown, literally.

Wed, 04/27/2011 - 10:56 | 1211581 6 String
6 String's picture

I said reverse course for a bounce, not a permament move higher. I'm tellin ya, pay attention. When ZH hits something too hard, it reverses. Almost quaranteed.

The contraian (sp?) in me says that there will be a bounce. Everyone believes the dollar has broken support so freefall is in place. Hardly. What will happen is it will bounce as the pessimism near term peaks.

Watch and learn.

Wed, 04/27/2011 - 11:00 | 1211605 SheepDog-One
SheepDog-One's picture

I see so 'reverse course' by lying about ending QE and raising rates? Lets see if China buys it, and reverses their dollar pessimism and halts dumping $2 trillion in UST's.

Wed, 04/27/2011 - 11:30 | 1211788 6 String
6 String's picture

Yeah, you know, I actually wish the Chinese would just get on with it. I don't know why they want to let American's live so fat off their labor. The Chinese dumping 2 trillion in treasuries would be awesome and I wish they would begin rigth after today's FOMC conference frankly.

I am so sick of everthing--Teppers best voice, EVERYTHING, being so artificial and bogus. China's move could begin the cleansing process if they'd just fucking do it. I think the Chinese are far larger pussies than everyone gives them credit for....I mean, seriously, bring it. Sell you treasuries already goddmannit.

Of course, it'll turn out to be more worthless noise.

Wed, 04/27/2011 - 12:01 | 1211907 Creed
Creed's picture

The contraian (sp?) in me says that there will be a bounce. Everyone believes the dollar has broken support so freefall is in place. Hardly. What will happen is it will bounce as the pessimism near term peaks.

 

+1

silver on sale shortly

Wed, 04/27/2011 - 10:48 | 1211541 his_name_is
his_name_is's picture

First!

Wed, 04/27/2011 - 10:54 | 1211566 SheepDog-One
SheepDog-One's picture

Um.....ok.

Wed, 04/27/2011 - 11:13 | 1211709 Orly
Orly's picture

His name is Dufus.

Wed, 04/27/2011 - 10:59 | 1211626 InconvenientCou...
InconvenientCounterParty's picture

Bernake, Wollfowitz, Rumsfeld, Cheney, Bush.

A long line of misunderstood American patriots.

Wed, 04/27/2011 - 11:42 | 1211834 cosmictrainwreck
cosmictrainwreck's picture

mis-underappreciated, all

Wed, 04/27/2011 - 11:02 | 1211631 SheepDog-One
SheepDog-One's picture

Go ahead and hint at tightening, I dare ya FED!

Wed, 04/27/2011 - 11:11 | 1211694 the grateful un...
the grateful unemployed's picture

tightening is definitely on the table, jawboning mostly. it would be candid of the Fed to say that raising rates a quarter point won't make much difference. But the point of the exercise is it imply more tightening and let the markets do the work for you. 

the official line is that the economy is growing, that is dogma, with a caveat about employment still not being as robust as we would like.

the real issue is the deficit and how can you keep printing money? (we're not printing money, did anyone find a bill with my name on it, was the ink wet?) 

QE3 is a real bomb, and Bernanke might let it slip here, that he doesn't intend to continue, but taking some steam out of the stock market, so you can put it back again, that's his plan. he doesn't want to be so obvious that daytraders in their pajammas can game his every move. A couple hundred points on the DJIA, and then BTFD. easy enough really.

Once before Bernanke said the dollar was none of his business. he might say that again. preached about fiscal responsibility out of one side of his mouth, and warn the Congress about not raising the debt ceiling on the other. vintage Greenspeak.

 

Wed, 04/27/2011 - 11:14 | 1211699 Rogerwilco
Rogerwilco's picture

There will be no mention of weakness in the economy or a weak dollar. He will declare victory for Fed policies to-date and make it clear that rates are headed higher.

Wed, 04/27/2011 - 12:30 | 1212022 the grateful un...
the grateful unemployed's picture

the economy is strong, but we have to keep ZIRP to maintain growth. (feel the market love, DJIA 36K bitchez)

Wed, 04/27/2011 - 11:14 | 1211716 buzzsaw99
buzzsaw99's picture

if he was honest he would say:

 

dxy to 70

snp to 1500

2011 jpm bonuses $25B

Wed, 04/27/2011 - 11:40 | 1211837 Dr. Impossible
Dr. Impossible's picture

...Amero announcement?

Wed, 04/27/2011 - 11:42 | 1211842 AldoHux_IV
AldoHux_IV's picture

It's all just masturbation in the end-- thanks Shiti.

Wed, 04/27/2011 - 17:25 | 1213713 hamstercheese
hamstercheese's picture

will someone please explain to me this move in the 30 year bond, as tweeted by ZH...

http://plixi.com/photos/original/96490211

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