US Dollar May Reverse Drop as Markets Rethink Fed Rate Hike Chances

by **Cals** Thu 19 Nov 2015, 17:19

US Dollar May Reverse Drop as Markets Rethink Fed Rate Hike Chances
By Ilya Spivak
Published: November 19, 2015
The US Dollar fell as markets reacted to the seemingly timid tone of minutes from October’s FOMC meeting but a reversal of the currency’s fortunes may be looming.
Talking Points:
 US Dollar Drops as Fed Meeting Minutes Cast Doubt on December Rate Hike
 On-Coming Fed-Speak May Encourage Rethink of Imminent “Liftoff” Chances
 Track Economic Releases Directly on Your Charts with the DailyFX News App
The US Dollar underperformed in overnight trade amid continued fallout following the release of minutes from October’s Fed policy meeting. The Australian and New Zealand Dollars outperformed as risk appetite firmed, driving the sentiment-linked currencies upward. The MSCI Asia Pacific regional benchmark stock index rose over 1 percent.
Traders latched on to comments from a dovish minority on the rate-setting FOMC committee that remained dubious about the likelihood of a December rate hike. That seemed to inspire hopes that liftoff may yet be delayed. This was presumably seen as supportive as markets continue to fear stimulus withdrawal at a time when overall global growth is slowing.
S&P 500 futures are pointing firmly higher in late Asian trade, hinting the risk-on mood is poised to carry forward. The move may swiftly fizzle however as cooler heads prevail over knee-jerk optimism. The Minutes document showed that almost all Fed officials agreed on a need to assess labor market strength. That seemed to set the stage for what was needed to cement rate hike chances. The subsequent 271k surge in nonfarm payrolls may have delivered precisely what Janet Yellen and company were looking for.
Scheduled commentary from Atlanta Fed President Dennis Lockhart and Fed Vice Chair Stanley Fischer – both of whom seemingly lean toward December liftoff based on recent commentary – may drive this point home in the hours ahead. That could trigger a swift reversal in the greenback’s fortunes, reversing overnight losses.