US Dollar, Market Sentiment at the Mercy of the Federal Reserve
- US Dollar and Market-Wide Sentiment at the Mercy of the Federal Reserve
- Australian Dollar Sinks as Soft CPI Data Fuels RBA Rate Cut Speculation
- See Economic Releases Directly on Your Charts with the DailyFX News App
A quiet economic calendar in European trading hours puts the monetary policy announcement from the Federal Reserve firmly in focus. A rate hike looks overwhelmingly unlikely. Fed funds futures suggest traders expect “liftoff” no sooner than March 2016. That means tightening now would almost certainly send markets into a tailspin. Avoiding just such an outcome is almost certainly why the Fed opted against a hike in September. Officials are surely no keener to spook investors at this point.
With that said, most Fed policymakers have continued to express a preference for raising rates in 2015. If that is truly on the agenda, the statement issued by the rate-setting FOMCcommittee following the meeting will have to set the rhetorical foundation for a December move.
Hawkish commentary will clash with market expectations and force a readjustment, boosting the US Dollar. It is also likely to weigh on risk appetite, punishing the so-called “commodity currencies”.A dovish lean is likely to yield the opposite result, though follow-on momentum may be capped considering this would amount to convergence with an already priced-in outlook.
The Australian Dollar underperformed in otherwise quiet overnight trade after third-quarter CPI data fell short of economists’ expectations. The benchmark year-on-year inflation rate registered at 1.5 percent, unchanged from the second quarter but lower than consensus forecasts calling for a print at 1.7 percent.
Traders interpreted the outcome as bolstering the likelihood of RBA easing head, with the currency sinking alongside a drop in front-end Australian bond yields. OIS rates suggest the markets now see a 91 percent probability of a 25bps reduction in the cash rate at November’s policy meeting.
Losing Money Trading Forex? This Might Be Why.
|23:50||JPY||Retail Trade (YoY) (SEP)||-0.2%||0.4%||0.8%|
|23:50||JPY||Retail Sales (MoM) (SEP)||0.7%||1.1%||0.0%|
|23:50||JPY||Dept. Store, Supermarket Sales (SEP)||1.7%||1.1%||1.8%|
|00:30||AUD||CPI (QoQ) (3Q)||0.5%||0.7%||0.7%|
|00:30||AUD||CPI (YoY) (3Q)||1.5%||1.7%||1.5%|
|00:30||AUD||CPI Trimmed Mean (QoQ) (3Q)||0.3%||0.5%||0.6%|
|00:30||AUD||CPI Trimmed Mean (YoY) (3Q)||2.1%||2.4%||2.2%|
|00:30||AUD||CPI Weighted Median (QoQ) (3Q)||0.3%||0.5%||0.5%|
|00:30||AUD||CPI Weighted Median (YoY) (3Q)||2.2%||2.5%||2.4%|
|01:45||CNH||Westpac-MNI Consumer Sentiment (OCT)||109.7||-||118.2|
|05:00||JPY||Small Business Confidence (OCT)||49.2||49.0|
|07:00||EUR||German Import Price Index (MoM) (SEP)||-0.2%||-1.5%||Low|
|07:00||EUR||German Import Price Index (YoY) (SEP)||-3.5%||-3.1%||Low|
|07:00||EUR||German GfK Consumer Confidence (NOV)||9.4||9.6||Low|
|CCY||Supp 3||Supp 2||Supp 1||Pivot Point||Res 1||Res 2||Res 3|
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.