Dollar Spikes As Fed Hikes & Signals More To Come
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Hawkish Hike From Fed
The US Dollar is starting the day on a quieter footing following the sharp rally higher we saw yesterday in response to the September FOMC meeting. The Fed seemingly satisfied traders’ hawkish expectations as it hiked rates by a further .25% while signalling that another hike before year end is expected. There had been plenty of discourse ahead of the meeting as to whether the Fed would be able to deliver a hawkish enough message to keep the recent USD rally alive. As it turns out the Fed was able to further the rally with the updated dot plot forecasts showing 12 of 18 members expecting at least one further hike this year and four members expecting tow further hikes. Additionally, both growth and inflation forecasts were revised higher over the target horizon with inflation now set to end the year around 3.4% up from the 3.3% forecast in June.
Bullish USD Risks
With inflation seen higher and a clear hawkish shift in the dot plot update, USD is expected to remain skewed upward near-term with the focus now on when the Fed is likely to pull the trigger again. Market pricing for an October hike is currently around 50% with December seen as the likely target. However, if incoming data (especially inflation and labour market data) show fresh strength, October pricing could rise, pulling USD further higher accordingly.
Technical Views
DXY
The rally in the index has seen price breaking back above the 100.18 level with the market now retesting the broken bull channel lows. Bulls need to see a clean break above here to put the focus on the 101.91 level next or risk a correction lower towards 99.15 again.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.