Fed is likely to keep policy on hold through the second half of 2017 - Rabobank

Analysts at Rabobank argue that the US May labour report on Friday could be crucial in directing market expectations regarding Fed policy in the coming months.

Key quotes:

"The market is firmly positioned for a rate hike on June 14.  But, in our view, the Fed will keep policy on hold through the second half of 2017.  A spate of mixed US economic data and concerns that the Trump Administration’s energy will be sapped by scandal has diluted hopes for fiscal stimulus this year.  Comments from the Fed’s Bullard that Washington will have to deliver promised tax changes at some point to prevent the honeymoon period in the US equity market from stalling are in tune with the soggy tone of treasury yields and the USD through the spring. The DXY dollar index has picked up some ground today largely on the back of a softer EUR.  An upward revision to the US Q1 GDP report last week has also lent some support."