Federal Reserve rate futures continued their recent volatility, with the December Fed Funds contract now showing a smaller 40 percent chance that the central bank will cut rates by 50 basis points at their upcoming meeting. Recent economic developments were likewise enough to send US Treasury bond yields higher for the second consecutive trading day—improving the dollar’s stance against major forex counterparts. Though short-term yields remain near multi-year lows, early signs of improvement suggest that the dollar stands to gain further in the days ahead. Yet such an outlook will very much depend on tomorrow’s critical Bank of England and European Central Bank interest rate decisions—both of which promise strong volatility across major currency pairs.
Otherwise, dollar traders will look to Friday’s critical US Non Farm Payrolls report to drive short-term price movements through currency markets. Current consensus forecasts for a net 75,000 gain in domestic payrolls may be revised higher in light of recent ADP Employment figures. Yet traders know that the private ADP figures have proven grossly inaccurate at several points in the past—leaving questions as to the dependability of the result.
Written by David Rodríguez, Currency Analyst for DailyFX.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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