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US Dollar to Rise if the Fed Keeps its Rate Hike Forecast Steady

US Dollar to Rise if the Fed Keeps its Rate Hike Forecast Steady

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar to rise if the Fed rate hike outlook stays unchanged
  • Canadian Dollar continues to gain on hawkish BOC tone shift
  • British Pound corrects higher after yesterday’s broad selloff

Most major currencies marked time in Asian trade as markets looked ahead to the Fed monetary policy announcement. The Canadian Dollar continued to edge higher as traders priced in recently hawkish BOC rhetoric while the British Pound corrected lower having outperformed on the prior day.

The rate-setting FOMC committee is widely expected to issue a rate hike. Indeed, the priced-in probability of a 25bps increase implied in Fed Funds futures now stands at 97 percent. That means investors will look to updated official forecasts and a press conference with Chair Yellen to move markets.

In the context of recently disappointing US economic data and increasingly acute political uncertainty fears, keeping the 2017 rate hike path unchanged may be interpreted as hawkish. Signaling that officials are not dependent on fiscal largesse to justify tightening might reinforce that message, boosting the US Dollar.

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Asia Session

US Dollar to Rise if the Fed Keeps its Rate Hike Forecast Steady

European Session

US Dollar to Rise if the Fed Keeps its Rate Hike Forecast Steady

** All times listed in GMT. See the full DailyFX economic calendar here.

--- 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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