Steen Jakobsen, Saxo Bank:


March has become the MAXIMUM INTERVENTION month it’s also the ’Ides of March’ as my presentation in Asia the last two weeks was called………

So far this month we have had China’s National People Congress which got industrial metals to explode based on “hope” of more stimulus from China:

Then we had the Draghi Bazooka – which is interesting, but hardly the medicine needed for increased inflation and growth (more on this in the next Steen’s Chronicle)…. But…. It was seen as yet another hand-out to banking sector:

Then this week BOJ where Kurado is stuck, but of course “he and BOJ can do more….” – Yes right….I’m just back from Japan – and I have strong feeling Abe is out before the year is over (again more in the Chronicle..)


The real event remains the Fed – and tonights FOMC meeting….. All other events is merely pre-course to this big event. US is at full employment, there has been ‘improvement’ in inflation (mostly technical…) and economic data has improved markedly:

What to look for tonight: It’s VERY simple:

Fed started the year indicating in “dots”  that we would see 3-4 hikes (75-100 bps hikes) – by Mid-February the market was saying… it’s more likely you cut than hike, and now today market is looking for 1.5x hike vs. Fed’s 3-4 hikes… The battle is on: Fed wants to keep tightening bias, market continues to fade the FED…

Here is the present Fed outlook – courtesy of Bloomberg LLP.

Source: Bloomberg LLP – Ticket Fed DOT PLOT…

There are several important things to notice:

1.)  Most important and totally ignored by markets: Emperically the Fed ALWAYS surprise to upside in rate hike cycle – Market always remains sceptical early in cycle and always needs to catch up to Fed. (Maybe difference of interest?). This is a fact not a guestimate. Market always thinks this cycle is different – and – Fed is always dogmatically following their “model”

2.) There is presently three strong “voices” on Fed – vs. one during Greenspan and 1,5 during Bernanke Chairmanship. Fischer is the nestor and the ideological ambassador, Dudley is the hands-on manager and then Yellen, but right now as reported by Bloomberg the outliers is Fischer vs. Brainard: – My bet is on Fischer…….

3.)  There needs to be a “solution” between market and Fed – This meeting will most likely see Fed dots raised slightly and market will be further behind……

The “probability of Fed hikes” for this meeting is 4% or close to zero – mind you nothing has probability of zero, so in my estimate the real odds is 25% chance of hike tonight and more than 75% for the July(July meeting tends to yield surprise/action historically) meeting based on today’s available data and global economic conditions.

OVERALL it remains important to point out that during Fed hikes cycles:

1.   The US dollar will be weaker one year post the initial 1st hike (4 out 5 cycles)

2.   The best performing asset is EM….

3.   Fed tends to deliver more hikes than market initial thinks.

Attached: Allianz Research paper: Historical lessons from Federal Reserve rate-hike cycles


My “trend” models is far from any significant signals except in “soft commodities” – looking to buy agriculture:  Coffee, Sugar….getting close to selling GBP again, its long AUD, and flirting with long in credit, but for now even the “model” is in wait-and-see mode in a month which saw Julius Ceasar killed (Ides of March)- what will it be: A new beginning or end of MAXIMUM INTERVENTION – tonight will give some clues.