Popular ’Fed Can’t Hike’ Reasoning As the Dollar Slows After Key Break

Talking Points:

• After breaking to 12-year highs after a strong NFPs, USDollar has struggled for follow through

• Debate over a near-term - as early as December - Fed hike intensifies through such indecision

• The Fed may hold and the Dollar further retreat, but not likely because of some of the popular theories floated

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When a key technical move and convincing fundamental development fail to offer immediate satisfaction in trend, doubt grows. That seems to be the case with the USDollar which has this week settled after the post-NFP surge leveraged Fed rate speculation. As the currency eases back, doubt seeps in for bulls and bears see their skepticism solidified. However, we should separate reasonable expectations for a bearish shift from the unlikely but popular claims. A Fed hold on rates - either pushed out months or indefinitely - could deflate the Dollar, but such a view is based on increasingly implausible scenarios. In today's Strategy Video, we discuss the reality of arguments that the Fed will necessarily defer due to: an election year, growth fears, permanent deflation and an exaggerated connection to the capital markets.

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