Halister News

(Bloomberg) -- Note by SF Fed Pres. John Williams released Mon. was taken as sign of further delay in Fed normalization and spurred USD selling in Asia; mkt “was likely suffering from a bout of mis-interpretation and flawed inference,” Macquarie strategist Thierry Wizman writes in note.

• While mkts initially took Williams’ note “in stride” Mon. in U.S., result was different in Tues.’s Asia sessions
  • Traders “pounced” on USD and bought EUR, GBP, CAD, AUD
  • Note was seen as indication Fed might delay rate hikes in short term or keep rates low indefinitely/several yrs
• Williams’ note “has little bearing on the timing of the next FOMC rate hike”; Macquarie stands by Dec. call, sees 60% probability of a hike this yr
  • Fed has “theoretical” incentive to normalize as long as natural rate of interest is above current rate
• SF Fed head was arguing for global interest rates to stay low indefinitely, not just U.S. rates; shouldn’t obscure fact that FOMC is on track to raise rates once this yr
• EUR, CAD still have room to depreciate against USD