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Will a Hawkish FOMC Rekindle Panic Across Financial Markets?

Will a Hawkish FOMC Rekindle Panic Across Financial Markets?

Ilya Spivak,

Talking Points:

  • Hawkish FOMC may boost US Dollar, fuel risk aversion
  • UK 4Q GDP data to inform 2016 BOE rate hike probability
  • Aussie Dollar view clouded on clashing cues before CPI

The US Dollar may rise while risk aversion returns to punish higher-yielding currencies if this week's FOMC policy announcement strikes a hawkish tone, hinting recent volatility will not derail policymakers' rate hike plans.

Fourth-quarter UK GDP data will help traders gauge the possibility of a 2016 interest rate hike following hawkish comments from BOE Governor Mark Carney over the weekend.

Conflicting cues ahead of the fourth-quater Australian CPI data cloud investors' outlook. A soft print is likely to amplify RBA interest rate cut probabilities and hurt the Aussie Dollar while a firm outcome stands to deliver the opposite result.

--- Created 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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