Week in FX Americas – Fed’s Communication Skills Better Be Sharp

The market will be consumed by the Fed and what policy makers will have to say for themselves next week. Investors collectively have already done some significant pre-meeting asset price damage this week. The bleeding only happened to stop after investors took some comfort in a WSJ Fed watch report suggesting that any bond tapering would be gradual in nature and that rates would remain "low" for a considerable period of time.

A communication challenge remains for Ben and his policy-making cohorts. By now everyone should be aware that future Fed policy should undertake three distinct phases: tapering, pause and tightening. For many individuals the unknown variable is the length of time between each of the above phases. The market is expecting 'helicopter' Ben to press home the point next week that there will be a considerable amount of time between 'ending' (note, not tapering) QE and raising rates.

The Fed needs to be very transparent when highlighting the point between "taking the foot off the gas and applying the brakes." Getting its message across in a clear and precise manner, with the least amount of market destruction, is not an easy task for central bankers. Separating the three phases, especially as unemployment eases is a trick not yet learned. It's the Fed's job to make the transition from each phase as smooth as possible. Let's hope their communication skills are sharp next week – not too many can handle back-to-back weeks of such price destruction.

WEEK AHEAD

* AUD RBA Meeting's Minutes
* GBP Core Consumer Price Index
* GBP BOE Inflation Letter
* USD Consumer Price Index
* GBP Bank of England Minutes
* USD Fed Interest Rate Decision
* USD FOMC Economic Projections
* USD Fed's Monetary Policy Statement and press conference
* EUR Producer Price Index
* CHF SNB Interest Rate Decision
* BOE Bank of England Minutes
* CAD Bank of Canada Consumer Price Index

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Dean Popplewell

Dean Popplewell

Vice-President of Currency Analysis and Research at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell