from Zero Hedge:
Federal Reserve officials are virtually certain to hold interest rates steady when their meeting ends today but they could try to send a message to markets and outside observers about what likely comes next. With no press conference scheduled after this week’s meeting and no new economic forecasts to be released, all the attention will be focused on their words and the market is more aware than ever that the Fed doesn’t act in a vacuum. As Bloomberg’s Richard Breslow notes, The Fed is hopeful (that their always-wrong forecasts come true this time) but they’re also scared to death on the consequences.
Bloomberg’s Mark Cudmore notes that while Fed monetary policy may not change today, any shift in wording from last month’s statement may have massive consequences.
The recent divergence of U.S. rates and the U.S. dollar implies the future path for global assets is increasingly binary.
U.S. financial conditions are now easier than they were at the time of the December rate hike and challenging the two- year trend of tightening.Any dovish signal today would provide yet another significant reflationary impulse to global asset prices
Emerging market assets have paused recently and may be the biggest beneficiaries of such an outcome
On the flip-side, if the statement (there’s no press conference scheduled today, so this is the only insight investors will be getting) indicates a summer rate rise is likely, the Bloomberg Dollar Index will smash the three- month downtrend and lead to a significant re-tightening of financial conditions.
The knock-on effects could be spectacular. Speculative positioning is now net short the dollar for the first time since July 2014, according to the most recent CFTC report. The Bloomberg Commodity Index is up 9% in the last three weeks alone
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