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USD: Flying on a jet plane – TDS

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 5, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Research Team at TDS, note that the USD has extended its positive run with the DXY index up for a third consecutive day and the boost to the USD comes after fairly hawkish commentary from Fed Chair Yellen cemented yesterday that December was a ‘live’ meeting for a rate hike.

    Key Quotes

    “A solid ISM services report has added to the dollar’s tailwinds, but we find it notable that the USD appears to be underperforming interest rate differentials, at least on some fronts. We certainly see potential for a catch-up move in the USD, particularly if Friday’s employment data confirms a pickup in US activity, but it may also be hinting at a shift in the market’s underlying dynamics.”

    “Against this backdrop, we thought it was interesting that Vice-Chair Fischer did not embrace the opportunity in comments overnight to hammer home his previous statements that a rate hike is appropriate by year-end. We would certainly not consider his remarks on the dovish side – or even neutral for that matter – as his observations that inflation is “not as low as you think” underscore his bias.”

    “We do think, however, that his apparent restraint here underscores their preference that markets go into the December meeting, and those that follow, priced 50/50 for a rate hike. With the implied probability of a move inching toward 60%, we may see a little balanced commentary out of the FOMC in coming days. Today provides a decent test of this theory with comments expected form Dudley, Lockhart, and Tarullo over the course of the day.”

    “Data-wise, the US calendar is fairly light, with only the weekly jobless claims reading (CF: 262K, TD: 256K) and the preliminary Q3 productivity report. The latter is unlikely to be market moving, but it will attract some attention from analysts, academics, and policymakers as low productivity growth has been a recurrent problem across several advanced economies.”

    “The upside of this, however, has been a positive influence on payroll growth; the pace of unit labour cost growth will also be of interest to those currently engaged with the ongoing debate over the ‘Phillips Curve’ and its forward-looking implications for inflation. Most investors, however, are unlikely pay either much heed ahead of tomorrow’s more immediate concern, the October employment report.”
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