Subscribe to RSS

US Dollar Outlook Favors Gains on Fed Rate Decision Outcome

The US Dollar is likely to rise following the Federal Reserve monetary policy announcement regardless of whether policymakers opt for a rate hike or not.

Talking Points:

  • US Dollar to Rise on Hawkish Rhetoric Even if FOMC Forgoes a Rate Hike
  • Outright Tightening to Weigh on “Commodity Dollars”, Boost Japanese Yen
  • See Economic Releases Directly on Your Charts with the DailyFX News App

The markets are firmly focused on the outcome of the Federal Reserve monetary policy meeting in the hours ahead. The split in economists’ expectations for the likely outcome is nearly even. A survey of 113 Fed-watchers polled by Bloomberg reveals a 59-54 preference for rates to remain unchanged this time around. The markets themselves are a bit more skewed in their priced-in outlook. Fed funds futures imply a 32 percent chance of a rate hike while OIS-based measures dismiss the possibility of such an outcome altogether.

On balance, this suggests a rate hike would amount to the most violent reaction from asset prices in that it would be a surprise to the largest contingent of market participants. Such a scenario is likely to deliver a strong advance for the US Dollar and weigh heavily on risk appetite, disproportionately punishing the sentiment-geared Australian, Canadian and New Zealand Dollars while offering haven-flow support to the Japanese Yen.

The absence of outright tightening may not be significantly market-moving in and of itself because that much is probably priced in. In this scenario, the focus will turn to text of the policy statement, the updated set of FOMC economic and policy forecasts, as well as the press conference with Fed Chair Yellen following the announcement. The cumulative take-away from these various components of the central bank’s forward guidance suite seems more likely to favor a stronger greenback.

The Fed has been stressing its preference to raise rates in 2015 since the beginning of the year. Most recently, key FOMC officials including Vice Chair Stanley Fischer made it explicitly clear that recent tumult in the financial markets has not decisively altered the central bank’s policy-setting calculus. This makes sense: the Fed’s “medium term” objectives are meant to be reached within a 2-3 year window, so a single month of jittery price action should not trigger an about-face on strategy.

With only two meetings left for the year, this means opting for the status quo this time will require a hawkish turn in official rhetoric. This will serve to set the stage for tightening in October or December, preserving the credibility in the Fed’s communicated intentions. While this would not generate as potent of a positive response as a rate increase, it would underscore the acute disparity between the trajectory of US monetary policy and that of the rest of the G10, boosting the benchmark currency.

Needless to say, the absence of a pro-tightening shift in commentary or the appearance of a dovish lean are likely to energize risk appetite and weigh heavily on the US unit. The probability of either scenario seems decidedly lower than the alternative.

Critical Levels
CCY Supp 3 Supp 2 Supp 1 Pivot Point Res 1 Res 2 Res 3
EURUSD 1.1061 1.1168 1.1229 1.1275 1.1336 1.1382 1.1489
GBPUSD 1.5055 1.5253 1.5373 1.5451 1.5571 1.5649 1.5847

 

0 commentsback to post

Add your comment

Nickname:
E-mail:
Website:
Comment:

Other articlesgo to homepage

Start Forex Trading with to get $100 Free Bonus – ACY

Start Forex Trading with to get $100 Free Bonus – ACY(0)

Start Forex Trading with ACY to get $100 Free Bonus. Initial deposit greater or equal to $400, you can claim $100 Forex Free Bonus. Link: Start Trading with to get $100 Bonus Available to: New and Existing clients Ending Date: 31 December 2017 Bonus Offer: Start Forex Trading with ACY to get $100 Bonus to

$888 Extra Forex Bonus Amount Promotions – FortFS

$888 Extra Forex Bonus Amount Promotions – FortFS(0)

$888 Extra Bonus Amount Promotions, All accounts take part in the 888 Extra Bonus Amount Promotions with the exception of Newbie, PRO and STAR live accounts. Link: $888 Extra Bonus Amount Promotions Link: $5 Forex No Deposit Welcome Bonus Link: Up to 50% Bonus of Every Deposit Link: 15% Support Margin Deposit Bonus Available to:

Deposit $500 to Receive a $350 Special Bonus – AvaTrade

Deposit $500 to Receive a $350 Special Bonus – AvaTrade(0)

Deposit $500 to receive a $350 Special Bonus up to 14000. This 35% Special Bonus Promotion is available to USD, EUR, AUD and GBP base currency accounts Link:  100% Bonus to Your First Deposit Link:  30% Sign-up Bonus on your Deposit Link:  30% Enjoy Reduction on Spreads Available to: All new account Ending Date: 31

$50 No Deposit Forex Cash Bonus today – Vantage FX

$50 No Deposit Forex Cash Bonus today – Vantage FX(0)

Open a live trading account and claim your $50 No Deposit Forex Cash Bonus today. $50 No Deposit Forex Cash Bonus is valid for two calendar months from the date it is credited to your trading account. Link:  $50 No Deposit Forex Cash Bonus Available to: New and Existing clients Ending Date: 31 December 2017

Forex Monthly Live Trading competition – Tickmill Ltd.

Forex Monthly Live Trading competition – Tickmill Ltd.(0)

Forex Monthly Live Trading Contest. Put your forex trading skills to test and win up to $1000 every Month! Forex Live Trading Contest is only available for clients of Tickmill Ltd.(FSA Regulated) Link:  Weekly Demo Race Trading Contest Link:  $30 Free Welcome Bonus Offer Link:  Forex Monthly Live Trading Contest Available to: All new traders

50% Deposit Bonus and $30 Free Trading Bonus – XM

50% Deposit Bonus and $30 Free Trading Bonus – XM(0)

Get 50% Deposit Bonus and $30 Free Trading Bonus. XM offers its clients multiple trading benefits to stay at XM, starting with a $30 Free Trading Bonus “No deposit required” Link:  $30 Forex No Deposit Bonus Link:  50% Deposit Bonus up to $500 Available to: All new trading account Bonus offer: 50% Deposit Bonus and

$50 Forex No Deposit Bitcoin Bonus Promotions – UFX

$50 Forex No Deposit Bitcoin Bonus Promotions – UFX(0)

$50 Forex No Deposit Bitcoin Bonus Special Promotion to all new trading account holder. Start Forex Trading Bitcoin with UFX and  Get a $50 No Deposit Bonus Link:  $50 Forex No Deposit Bonus Promotion Link:  $50 Free No Deposit Bitcoin Bonus Link:  Halloween Trick or Trade Competition Available to: All new trading account Ending Date:

Up to 100% Bonus Promotions for Each Deposit – AvaTrade

Up to 100% Bonus Promotions for Each Deposit – AvaTrade(0)

Bonus up to 100% for Each Deposit, This Bonus offer is available to USD, EUR, AUD and GBP base currency. AvaTrade Leading Online Forex Trading Broker Start now and get a Deposit Bonus of up to 100%. Link:  100% Bonus to Your First Deposit Link:  35% New Accounts Bonus Promotion Link:  Advantages of Trading Bitcoin

Start Forex Copy Trading your Perfect Partner – ForexTime

Start Forex Copy Trading your Perfect Partner – ForexTime(0)

Start Best Copy Trading your Perfect Partner. Join fxtm cutting-edge forex copy trading programme with fxtm Invest and match up with a suitable trader. Let them trade while you watch your potential forex profits grow. Link:  Start Copy Trading your Perfect Partner Link:  $25 Per Referral Earn up to $10000 Link:  Receive $30 Tradeable Credit

30% Binary Options Deposit Bonus Promotion – Ayrex

30% Binary Options Deposit Bonus Promotion – Ayrex(0)

30% Binary Options Deposit Bonus Promotion to all new Traders. Deposit Bonus can be applied to a deposit that equals 100 EUR/USD or a larger amount Link:  $100 Free Win in Just One Hour Link:  $30 Binary Options No Deposit Bonus Link:  30% Binary Options Deposit Bonus Ending Date: 31 December 2019 Available to: All

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