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US Dollar May Reverse Drop as Markets Rethink Fed Rate Hike Chances

US Dollar May Reverse Drop as Markets Rethink Fed Rate Hike Chances

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar Drops as Fed Meeting Minutes Cast Doubt on December Rate Hike
  • On-Coming Fed-Speak May Encourage Rethink of Imminent “Liftoff” Chances
  • TrackEconomic Releases Directly on Your Charts with the DailyFX News App

The US Dollar underperformed in overnight trade amid continued fallout following the release of minutes from October’s Fed policy meeting. The Australian and New Zealand Dollars outperformed as risk appetite firmed, driving the sentiment-linked currencies upward. The MSCI Asia Pacific regional benchmark stock index rose over 1 percent.

Traders latched on to comments from a dovish minority on the rate-setting FOMC committee that remained dubious about the likelihood of a December rate hike. That seemed to inspire hopes that liftoff may yet be delayed. This was presumably seen as supportive as markets continue to fear stimulus withdrawal at a time when overall global growth is slowing.

S&P 500 futures are pointing firmly higher in late Asian trade, hinting the risk-on mood is poised to carry forward. The move may swiftly fizzle however as cooler heads prevail over knee-jerk optimism. The Minutes document showed that almost all Fed officials agreed on a need to assess labor market strength. That seemed to set the stage for what was needed to cement rate hike chances. The subsequent 271k surge in nonfarm payrolls may have delivered precisely what Janet Yellen and company were looking for.

Scheduled commentary from Atlanta Fed President Dennis Lockhart and Fed Vice Chair Stanley Fischer – both of whom seemingly lean toward December liftoff based on recent commentary – may drive this point home in the hours ahead. That could trigger a swift reversal in the greenback’s fortunes, reversing overnight losses.

Losing Money Trading Forex? This Might Be Why.

Asia Session

GMTCCYEVENTACTEXPPREV
21:00NZDANZ Job Advertisements (MoM) (OCT)1.2%-2.3%
21:45NZDPPI Input (QoQ) (3Q)1.6%--0.3%
21:45NZDPPI Output (QoQ) (3Q)1.3%--0.2%
23:50JPYTrade Balance (¥) (OCT)111.5B-246.3B-115.8B
23:50JPYTrade Balance Adjusted (¥) (OCT) -202.3B-343.1B-309.8B
23:50JPYExports (YoY) (OCT)-2.1%-2.0%0.5%
23:50JPYImports (YoY) (OCT)-13.4%-8.6%-11.0%
00:30AUDRBA FX Transactions Government (OCT)-579M--785M
00:30AUDRBA FX Transactions Market (OCT)516M-712M
00:30AUDRBA FX Transactions Other (OCT)83M-89M
01:45CNYMNI Business Indicator (NOV)49.9-55.6
03:17JPYBOJ Annual Rise in Monetary Base ¥80T¥80T¥80T
04:30JPYAll Industry Activity Index (MoM) (SEP)-0.2%0.2%-0.1%
05:30JPYNationwide Dept Sales (YoY) (OCT)4.2%-1.8%
05:30JPYTokyo Dept Store Sales (YoY) (OCT)7.4%-4.9%
06:00JPYMachine Tool Orders (YoY) (OCT F)-22.9%--23.1%
06:30JPYBOJ’s Kuroda Gives Press Conference ---

European Session

GMTCCYEVENTEXPPREVIMPACT
07:00CHFTrade Balance (OCT)-3.05BMedium
07:00CHFExports Real (MoM) (OCT)-0.2%Low
07:00CHFImports Real (MoM) (OCT)-2.6%Low
08:00EURECB's Coeure Speaks in Frankfurt --Medium
08:30EURECB's Praet Speaks at Europe Finance Week --Medium
09:00EURECB Current Account SA (SEP)-17.7BLow
09:00EURECB Current Account NSA (SEP)-13.7BLow
09:30GBPRetail Sales Ex Auto Fuel (MoM) (OCT)-0.6%1.7%Medium
09:30GBPRetail Sales Ex Auto Fuel (YoY) (OCT)3.9%5.9%Medium
09:30GBPRetail Sales Inc Auto Fuel (MoM) (OCT)-0.5%1.9%Low
09:30GBPRetail Sales Inc Auto Fuel (YoY) (OCT)4.5%6.5%Low
11:00GBPCBI Trends Total Orders (NOV)-10-18Low
11:00GBPCBI Trends Selling Prices (NOV)-6-7Low
12:30EURECB Account of Monetary Policy Meeting --Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.05061.05811.06211.06561.06961.07311.0806
GBPUSD1.51031.51641.52001.52251.52611.52861.5347

--- 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.

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