This is a big week for the dollar as the Fed gets a second opportunity to explain what exactly Flexible Average Inflation Targeting means. Right now, I think the market is still a tad confused by the absence of clear AIT parameters post Jackson Hole.
We all understand what the AIT means for the future: The Fed will stay lower for longer when the unemployment rate falls. They will not hike rates until actual inflation has been above 2% for a while. This shift from proactive to reactive is well understood. For example, the Yellen Fed clearly would not have hiked in late 2015 under this framework.
What is not well understood is what the change in the framework means for Fed policy right now. Does it mean they need to immediately become much more accommodative in order to get core PCE above 2% ASAP and make up for years of downside misses? Are they going to make a credible promise to act irresponsible and aggressively drive inflation expectations higher? Or will they just slowly and smoothly move from stabilization to accommodation, signaling the new framework is only relevant down the road?
I think part of the USD rally post Jackson Hole is the result of the market getting more and more twisted up and confused about whether the new framework changes Fed policy now or only in the future. To get credibility on the inflation overshoot, Powell & Co. need a bit of shock and awe this week. Otherwise, it all starts to feel like BOJ part deux.
The biggest problem for the Fed is that they have nearly run out of channels through which to loosen financial conditions. P/E expansion has already been dramatic. Spread compression in corporate credit is near its theoretical limit given the ongoing waves of corporate default (I think?). Interest rates are very close to zero all the way out the curve.
The Fed is mostly pushing on strings at this point. Fiscal policy and the evolution of COVID-19 are much more important drivers of US growth and inflation than Fed policy. Given the lotto ticket trade is for a dovish Fed, not a hawkish one, I would think USD weakness and equity strength continue into Wednesday.
Get access to our market experts and sign up to receive the latest updates on any currency with our real-time exchange rate reports.
Sign up to receive the latest market news from our experts.
Who can use the MTFX payment service?
Individuals and businesses who need to send money in foreign currency internationally can use MTFX’s services. The beneficiary of the transfer must have a bank account for the funds to be paid into.
Personal clients usually use our services to transfer money between their own accounts in two different countries.
Business clients usually use our services to transfer funds to suppliers, fund international operations, or repatriate overseas earnings.
Why should I use MTFX and not my own bank?
MTFX offers currency exchange rates that are 2-5% better than those offered by the banks. Personal clients usually save hundreds of dollars per transfer and for larger transfers, the savings can run into the thousands.
We also offer excellent customer service, dedicated currency specialists, and a 24/7 online platform with best-in-class technology that allows you to complete transfers from any device virtually anywhere in the world.
Business customers save with better currency exchange rates and proven solutions geared towards managing and mitigating foreign exchange risk. Our solutions include forward contracts, market orders, rate alert services, and much more - all backed by great technology and great people.
How do customers send funds to MTFX?
Funds can be transferred via wire transfer, Electronic Funds Transfer (EFT), or ACH payment services. MTFX maintains bank accounts in all major currencies with highly-rated banks. Our banking infrastructure ensures that you can transfer funds to us quickly and securely.
How long does it take MTFX to transfer funds?
Our global network of banking partners allows us to get funds to virtually anywhere in the world quickly and efficiently. Most wire transfers from MTFX will be received by your beneficiary within 24-48 hours. MTFX also offers same-day transfers that are almost instantaneous, as well as low-cost in-country payment services for your less urgent transfers. For further information please speak to one of our currency specialists.
Please read the following update before logging in to your MTFX online account
We have updated our online dealing system to provide you with better functionality, more unique tools and an overall enhanced client experience. MTFX Online 2.0 is now available for your dealing needs. You can begin using our enhanced online portal today.
Please note that the traditional portal will be available for use until MAY 30th 2021 at which point it will be decommissioned.