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28.07.2021, 10:01

Fed Decision: Five things to watch – Nordea

FXStreet reports that Andreas Steno Larsen, Chief Global FX/FI Strategist at Nordea said that the Fed meeting tonight will likely not lead to a decision on tapering, but a lot of technical issues are on the table.

“On USD liquidity: Liquidity has already effectively peaked as the 5 bps hike to the ON RRP facility incentivized further usage of the facility. We may be in for an additional 200bn USD in liquidity.”

“On the Fed funds rate: The effective fed funds rate prints at 10 bps, which is still 2.5 bps below the mid-point, so there is absolutely no reason to think that the Fed regrets hiking the ON RPP and IOER rates by 5 bps before summer.”

“On QE: The Fed has recently started “stealth-twisting” it’s QE program with an increasing WAM of the SOMA-portfolio. The increasing WAM of the SOMA-portfolio could be an early sign that the Fed intends to maturity-sugarcoat a tapering process that arrives EARLIER than anticipated.”

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