The Swiss franc move adds support to my expectation that the Fed will NOT hike rates this year: 1.The move added instability and volatility to the markets thus making the USD even more attractive as safe haven.This could imply further lower UST yields down the line 2.Should the Fed hike, this would hit equities and other FI assets and make the USD even more desirable thus pushing further down UST yields-exactly the opposite of what the Fed wants 3.Should Greece, after the elections, play difficult this would generate another move to the USD and, hence, even lower UST yields. Bottom line, in a messy world you dont do something to set your own house on fire. The Fed will desist NOT because it cares about the Swiss or the Greeks, but because it cares about the US ! PS Isnt it funny that the AUD, in the middle of all this, strengthened and stayed strong ? If, as I expect, the Fed does not hike, the AUD is in for a good time as the highest yielder in all G20 ! Andrew
Posted on: Sat, 17 Jan 2015 06:14:15 +0000
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