Thread by @Trinhnomics

Okay, let's go through the Fed because markets are vomiting in Asia over the hawkish Q&A of the meeting yesterday🤮🤮🤮. As I say always, the Fed never promises you a rose garden & may change quickly (to ease or to tight).

Well, wut did le Fed say? A lot, for one, March hike &

After March hike, there will be more, and then it talked about BS normalization (no, not that BS, the balance sheet)!!!

And then it said inflation is high & getting WORSE (not transitory my friend, not transitory, as I told u before).
Ok, so we know markets priced hikes but BS?

No details yet on balance sheet normalization but a few clues how it will do it. First, we know the dollar is KING and it matters. And then Fed just said it will RAISE the price of the dollar & so cash is less trashy. And more! It will not just taper (still doing QE) but TIGHTEN.

In other words, we got inflation at 7% and sticky & unemployment low so le Fed can't justify FFR at close to zero + still doing QE.

So it's going to hike (it said so last night) + thinking about this balance sheet. Likely to tilt towards more UST less MBS in the future so wut?

So what? Well, not just short end rates (Fed hike expectations were pretty priced in before the meeting but the longer end flattened) but longer end rates will be impacted because it looks like not just rate hike but also BS normalization. Curve steepened on this. Markets vomited

Let's look at Asian FX - most impacted? So far it's the AUD and JPY. The rest are pretty resilient especially the dong, which is pretty strong considering this hawkish tilt? Why? It's not really a portfolio flow economy sort of story is it?

But look at IDR? Not so bad this time!

Look at Southeast Asia in general, weakens versus USD but not really a meltdown here. Of course equities are not happy but FX is a bit more resilient here.

Don't take my words for it: Watch Jerome Powell Presser here for yourself! Great public speaker.

federalreserve.gov/newsevents.htm