Fed: Fischer adds to hawkish chorus, stay short AUDUSD - BNPP

Research Team at BNP Paribas, notes that the vice Chairman Stanley Fischer in a speech 21 August added to the chorus of Fed officials who, we think, have started laying the groundwork for a September rate hike.

Key Quotes

“Fischer said that he thinks the Fed are close to achieving their employment and inflation targets and emphasised the US labour market’s proven resilience to external shocks. Combined with the comments last week from Presidents Dudley and Williams, the USD should trade with a firm tone heading into Jackson Hole.

The US 2y yield has risen to a post-Brexit high of 77bp, which should support the break lower in AUDUSD below 0.76. Fed Chair Yellen’s Friday Jackson Hole (10:00 ET) speech will be critical, with this the most obvious forum to send a signal ahead of the September 21 meeting. There are no other Fed speakers scheduled this week, but we would watch the wires for interviews ahead of the meeting.

On the data front, we expect a strong rebound in headline July durable goods orders on Thursday thanks to aircraft, but we would be particularly focused on the core capital goods orders numbers, as any indication that business investment is poised to pick up in Q3 would likely be particularly reassuring for the FOMC. We remain positioned for gradual USD recovery via derivatives recommendations in AUDUSD, GBPUSD, USDJPY and EURUSD.”