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.

0

Notifications

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

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bullish
Oil - US Crude
Bullish
Wall Street
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bullish
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • Traders tend to overcomplicate things when they’re starting out in the forex market. This fact is unfortunate but undeniably true.Simplify your trading strategy with these four indicators here:https://t.co/A4dqGMPylo https://t.co/xqbUxwWgTZ
  • An economic calendar is a resource that allows traders to learn about important economic information scheduled to be released. Stay up to date on the most important global economic data here: https://t.co/JdvW6HNuqV https://t.co/Gi8LHCT5sB
  • The AB=CD pattern is simple once you know how to spot it and draw the proper Fibonacci retracements. Make your trading strategy as simple as ABCD here: https://t.co/AKmlmaAZBS https://t.co/FFmRYyx4ou
  • There is a great debate about which type of analysis is better for a trader. Is it better to be a fundamental trader or a technical trader? Find out here: https://t.co/aVAzFypAg1 https://t.co/r7aJb4qpqc
  • There’s a strong correlation between interest rates and forex trading. Forex is ruled by many variables, but the interest rate of the currency is the fundamental factor that prevails above them all. Learn how interest rates impact currency markets here: https://t.co/ERyiY47G5H https://t.co/fIGDaDW21V
  • ...even more incredible is net speculative futures positioning in $EURUSD, rounding off from a record net long position...and it hasn't even cleared 1.20... https://t.co/SfyYTMTT1x
  • Net speculative futures positioning in the Dollar (here overlaid with the $DXY) has pushed to extreme levels commensurate to the levels in Oct 2017 and April 2018 https://t.co/JqHGgVUCqc
  • The $SPX closed below the 50-day moving average Friday. The first time it has done so in 103 trading days. The 'technical' end of an exceptional run: https://t.co/HUn5Q6JmlK
  • Despite recent weakness in the #SP500, the growth-linked New Zealand Dollar has been gaining momentum ahead of the #RBNZ next week Could this trend continue, or will $NZDUSD capitulate to the mercy of risk trends? Check out my fundamental outlook - https://www.dailyfx.com/forex/fundamental/forecast/weekly/nzd/2020/09/19/New-Zealand-Dollar-Outlook-NZDUSD-May-Rise-on-RBNZ-Watch-SP-500.html?CHID=9&QPID=917702&utm_source=Twitter&utm_medium=Dubrovsky&utm_campaign=twr https://t.co/34vcR4fjpT
  • RT @FxWestwater: #Copper rose to a fresh multi-year high as Chinese demand and supply-side issues continue to support price action amid a l…
US Dollar Slips Despite Rate Hike and Signal For Three More in 2018

US Dollar Slips Despite Rate Hike and Signal For Three More in 2018

2017-12-13 19:33:00
Christopher Vecchio, CFA, Senior Strategist
Share:

Talking Points:

- FOMC raises benchmark interest rate to range of 1.25-1.50%, as was expected by markets (Fed funds futures were pricing in a 100% chance pre-meeting).

- Near-term Fed interest rate glide path remains unchanged from December 2016, March 2017, June 2017, and September 2017: three more 25-bps hikes are anticipated in 2018.

- US Dollar produces choppy reaction intially, with the DXY Index eventually settling lower ahead of outgoing Fed Chair Janet Yellen’s press conference.

The Federal Open Market Committee did what was widely expected of them today when they announced they would raise the main overnight benchmark rate into a range of 1.25-1.50%, as was priced into the market well in advance of today’s policy meeting. Ongoing improvement in US labor market data, plus signs that growth conditions are continuing to improve, have offset an otherwise stable (yet slightly disappointing) inflation environment.

Looking at the summary of economic projections (SEP) and ‘dot plot,’ commentary from the initial FOMC statement suggests that policymakers are more optimistic on the US economy. Policymakers expect “inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent objective over the medium term.”

If there were to be a fly in the ointment in the future for the Fed’s projected rate hike timeline, then it seems it would be inflation: “Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

Overall, the FOMC saw the median Fed funds rate at 2.125% at the end of 2018, as they did in December 2016, March 2017, June 2017, and September 2017. Likewise, they saw the median Fed funds rate at 2.688% at the end of 2019, as was the case in the prior four SEP. In sum, today’s statement can be seen as more hawkish than what markets were pricing in ahead of time, given the outlook for only one hike next year. Yet today feels like a 'December 2015 FOMC meeting redux' - back then, like now, the market was less aggressive on glide path than FOMC was, and eventually FOMC proven wrong; was the USD's albatross through first nine months of 2016.

Here are the Fed’s new forecasts:

US Dollar Slips Despite Rate Hike and Signal For Three More in 2018US Dollar Slips Despite Rate Hike and Signal For Three More in 2018

Here is the Fed’s new dot plot:

US Dollar Slips Despite Rate Hike and Signal For Three More in 2018

See the DailyFX economic calendar for Wednesday, December 13, 2017

Chart 1: DXY Index 1-minute Chart (December 13, 2017 Intraday)

US Dollar Slips Despite Rate Hike and Signal For Three More in 2018

Immediately following the release of the policy statement, the US Dollar slipped back versus the Euro and the Japanese Yen, with the Dollar Index (DXY) dropping from 93.79 ahead of the FOMC decision to as low as 93.59. The DXY Index was trading at 93.67 at the time this report was written.

Fed Chair Janet Yellen is scheduled to speak at 14:30 EST/19:30 GMT; her Q&A should prove equally market moving as the initial statement release. Follow the commentary in the DailyFX Real Time News feed.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

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.

DISCLOSURES