Subscribe to RSS

The Fed: a rate hike cometh, time for the market to play catch up

The market has been wrong-footed once more by the Federal Reserve. The dollar is maintaining multi-month highs this morning after the President of the Dallas Federal Reserve gave the clearest signal yet that he would vote to hike US interest rates in September, if economic data remains on its current trajectory.

The market reacted to Lockhart’s comments: Treasury yields, both 10-year and 2-year, jumped by 6 basis points during Tuesday’s session. This had a knock-on effect on the dollar, the dollar index rose to its highest level since May, and remains above 97.00 as we start Wednesday.

Lockhart, a voter at the FOMC for 2015, has held a fairly neutral stance so far this year and has toed the Yellen line on policy. The fact that he is willing to speak out and say that he will vote to hike rates in September is interesting for a couple of reasons: either the next major meeting at the Fed will show a number of members breaking ranks and voting for a rate hike even if Chair of governors, Yellen, fails to do so, or Lockhart’s recent stance is a sign that many members of the FOMC, maybe including Yellen herself, are willing to hike rates next month. Either way, this is a hawkish shift in Fed commentary.

The first rate hike in 8 years…

Although we have been well prepped by the Fed for a rate hike for many years, the Federal Funds futures rate, a good gauge of market expectations for Fed interest rates, has not priced in the prospect of a rate hike for September, only looking for one rate hike by the end of the year.

Now that Lockhart has sounded a note of comfort around the prospect of a rate hike next month, the market is likely to rush to price in a rate hike for September, which could be just what the dollar needs to reignite its prior rally.

September/ December, does it matter?

Yes, it does. A rate hike in September could increase the number of rate hikes in the next 12-18 months. Although we believe that the Fed will take this rate-hiking cycle slowly, we believe that a September rate hike will fundamentally shift Fed Funds futures curve, which may rise sharply and we could see rate expectations for the end of 2016 rise from their current conservative stance of below 2%, towards the 2.5%. This could be a powerful driver of the buck for the coming days and weeks.

It’s all about payrolls:

Lockhart did say that the current trajectory of US economic data was the main reason why he was willing to vote for a rate hike next month, thus this Friday’s NFP report will be critical, a strong reading could see the dollar extend its recent rally and end the week on a high note. Whereas a disappointing NFP report, say 150k or lower, could trigger a dollar reversal and some tempering in US bond yields, as the prospect of a rate hike next month would once again be thrown into disarray.

The technical outlook:

We believe that a 220k+ payrolls reading on Friday could be enough to lift the dollar index above 100.00, which is vital if the dollar rally is to get some legs through to the end of the year. We continue to believe that the EUR and JPY are more vulnerable to a dollar rally than the pound, which could remain volatile as we lead up to the BoE’s Super Thursday!

0 commentsback to post

Add your comment

Nickname:
E-mail:
Website:
Comment:

Other articlesgo to homepage

500 Cent Forex No Deposit Welcome Bonus – FortFs

500 Cent Forex No Deposit Welcome Bonus – FortFs(0)

Get 500 Cent Forex No Deposit Welcome Bonus 2017-2018 to All New Traders. Open a forex real trading account, pass the personal data verification procedure and get the 500 Cent Free Forex Welcome Bonus! Link:  Up to 50% Bonus of Every Deposit Link:  500 Cent Forex No Deposit Bonus Link:  15% Support Margin Bonus Available

$10000 Monthly Challenge Live Trading Contest – FXCM

$10000 Monthly Challenge Live Trading Contest – FXCM(0)

$10,000 Monthly Challenge Live Trading Contest Compete to Win Cash Prizes. The Contest only available to FXCM Mini Account clients Join the monthly Live Trading Contest by opening an FXCM Mini Account with as little as $50. Link:  $10000 Monthly Challenge Contest Available to: All Mini Account clients Contest offer: $10,000 Monthly Challenge Live Trading

$1000 Free No Deposit Forex Bonus – Grand Capital

$1000 Free No Deposit Forex Bonus – Grand Capital(0)

Contests for Forex trader Main Prize $1000 Free No Deposit Forex Bonus. The Contests main prize is $1000 Free No Deposit Forex Bonus with fully withdraw able profit Link:  $1000 Free Bonus‎ Trader Contest Link:  $500 Forex No Deposit Welcome Bonus Link:  Up to 444% Profit Receive for a single trade Link:  40% Forex Deposit

Up to $5000 Trading Credits Bonus Promo – HYCM

Up to $5000 Trading Credits Bonus Promo – HYCM(0)

25% Forex Credit Bonus Promo available on your Deposits. Experience Some of HYCM New Features, Services and Offers Receive 25% Forex trading credit bonus Link:  25% Trading Bonus on your Deposits Ending Date:  31 December 2017 Available to:   New Clients only Bonus Offer: 25% Forex Trading Bonus Promo Available on your deposits to New Clients only.

$20 Forex No Deposit  Bonus Promo Action – NPBFX

$20 Forex No Deposit Bonus Promo Action – NPBFX(0)

$20 Free No Deposit Bonus Promo action. $20 Free No Deposit Bonus Client must submit application of requesting the accrual of bonus funds with indicating the number of trading account by email  info@npbfx.com. Link:  $20 Free Bonus Promo Action Ending Date:  1 March 2017 Available to:   New Clients only Bonus Offer: $20 Free No Deposit

300% Forex Tradable Bonus Promotion 2017 – MarketsYes

300% Forex Tradable Bonus Promotion 2017 – MarketsYes(0)

300% Forex Tradable Bonus Promotion All New and existing clients. MarketsYes is offering all prospective clients deposit for up to 3000 USD/EUR/GBP a 300% Tradable Bonus. Link:  300% Tradable Bonus Promotion Available to: All New and existing clients Ending Date: 31 December 2017 Bonus offer:  300% Tradable Bonus Promotion All New and existing clients. SETTLEMENT

FX Zones Forex Demo Trading Contests – Forex Time

FX Zones Forex Demo Trading Contests – Forex Time(0)

FX Zones Forex Demo Trading Contests 2017 Win up to a total of $12,000. ForexTime is doing something extra special with its trading contests this year, starting with FX Zones Forex Demo Trading Contest  2017 Link:  Demo Forex Trading Contest Link:  Loyalty Cashback Promotions Link:  200% Withdraw-able Cashback Rebates Available to:   New Clients only Contest

Get $88.8 Forex Free No Deposit Bonus – FBS Inc

Get $88.8 Forex Free No Deposit Bonus – FBS Inc(0)

Get $88.8 Forex Free No Deposit Bonus when you open your first FBS Real Account. The $88.8 Free Forex bonuses is credited automatically after account opening, upon verification of the clients phone number and e-mail. Link:  $123 Forex No Deposit Bonus Promotion Link:  $88.8 Lucky No Deposit Required Bonus (for Malaysian traders) Link:  100% Forex

100% Welcome Bonus to Your First Deposit – AvaTrade

100% Welcome Bonus to Your First Deposit – AvaTrade(0)

100% Special Welcome Bonus Offer to your first deposit Up to $300. Start trading today and in honor of our Irish roots we’ll give you a St. Patrick Day special Welcome bonus of up to 100% Link:  100% Special Bonus to Your First Deposit Available to: All new account Ending Date: 31 December 2017 Bonus

Share your photo and Free win $200 – Grand Capital

Share your photo and Free win $200 – Grand Capital(0)

Share your photo and Free win $100, $150 or $200. Comment this post with your photo, which conveys your/public perspective on how a Forex trader should look like and receive one of the great prizes Link:  $500 Forex No Deposit Welcome Bonus Link:  Up to 444% Profit Receive for a single trade Link:  Get $200

read more

Forex Featured Broker

Contacts and information

ForexDepositNews.com Forex Deposit Bonus, Forex No Deposit Bonus, Forex Live Contest, Forex Demo Contest, Free Forex Bonus Forex Brokers Review and Other All Forex promotions.

ForexDepositNews.com

Social networks

Most popular categories