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Yellen to rein in the dollar bulls - Rabobank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 19, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Guatemala) - Analysts at Rabobank explained that even though the strength of the October US labour data has convinced most market participants that the Fed is set to hike interest rates at its December policy meeting, the downside momentum in EUR/USD has been wavering this week. We attribute this largely to concerns that the Fed may lace a rate hike next month with a relatively dovish message.

    US price pressure remains moderate and with the gains in the USD since the middle of last year having effectively already tightened monetary conditions in the US, there is risk that the Fed may revise down its projections for further policy tightening next month.

    The Bloomberg dollar spot index (which tracks a larger basket of USD crosses than the DXY index) has risen 35% since the middle of 2011 with the majority of these gains being registered between mid 2014 and early 2015 as the EUR sold off.

    Going forward there is a chance of further easing from the ECB, BoJ, RBA, RBNZ, Norges Bank, SNB and the Riksbank. Consequently the Fed will be aware that interest rates differentials are threatening to drive the USD higher and, given the absence of accelerating price pressures in the US, there is strong risk that Fed Chair Yellen may chose to rein in the USD bulls."
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