Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.



Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events


Economic Calendar

Economic Calendar Events

Free Trading Guides
Please try again
More View More
US Dollar in Trouble as Fed Window May be Closed Until December

US Dollar in Trouble as Fed Window May be Closed Until December

Christopher Vecchio, CFA,

Talking Points:

- US Dollar struck down as Fed rate expectations collapse.

- Global equity markets remain cushioned by prospect of Fed policy.

- With FX volatility edging higher again, it's the right time to review risk management principles to protect your capital.

The May US labor market was the exact type of jobs report that could that could upend Federal Reserve policymakers' hopes of raising rates in June. Remember in January when the FOMC was suggesting it was still going to raise rates four times this year? That was an odd notion then, and it outright laughable now.

Before Friday's labor market report, the Fed funds futures contract was implying around a 22% chance of a rate hike in June. Today, it's pricing just 4%. Alas, as Robert Burns wrote in 1785 in "To a Mouse,"

The best-laid schemes o' mice an 'men

Gang aft agley,

Markets have quickly scaled back expectations of any further tightening this year, with the only rate hike projected to come in December (58.5% chance). Still, that's unconvincing, considering that the Fed has never raised rates unless the Fed funds futures contract has implied at least a 60% chance of hiking rates in the front month. Markets themselves aren't fully convinced that another hike is coming this year.

This doubt about further policy normalization by the Fed in 2016 is well-founded. We continually express our disbelief that the Fed (or the ECB for that matter) would announce a significant change to policy without concurrently releasing new staff projections and letting Fed Chair Janet Yellen hold a press conference to try and soothe markets.

In an effort to become more transparent, central banks have become more predictable. Skipping ahead past June, September is the next time the Fed would have a staff projections update and press conference, but it seems highly unlikely that any policy tightening will be done on the doorstep of what's already a vicious US Presidential election.

See the video (above) for technical considerations in EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/CAD, and the USDOLLAR Index.

Read more: Worst US Jobs Report Since September 2010 Sends US Dollar Plunging

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.