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FOMC on Track for December Rate Hike

The FOMC will conclude a 2-day meeting tomorrow, and release a statement with economic projections, and may even raise rates. This is the biggest event in the Forex market for the past 2 months, or arguably, even longer. The market’s strong consensus is that rates will be left unchanged, but will be raised at the December meeting by an additional 0.25%. The U.S. Dollar has been in a fairly strong downwards trend for some considerable time, ever since the start of 2017 in fact. If the FOMC does the unexpected and hike rates now, instead of waiting until December as the consensus anticipates, it would be likely to produce a strong rise in the USD which might be the catalyst for a trend reversal. Alternatively, if the language in the statement and numbers in the forecast are more hawkish than expected, that would probably give a boost to some long-term but flagging short-USD trends. Janet Yellen, Fed

Another key factor the market will be watching will be whether the Federal Reserve also commences an anticipated winding-down of its “balance sheet”, i.e. reduce the “quantitative easing” program. In plain English, whether the Federal Reserve will slow down its creation of U.S. Dollars. If it fails to announce this, the Dollar might strengthen.

So, which currencies or other assets might be best to trade against the U.S. Dollar in any scenario? That is a little tricky to answer, as the market looks a little mixed-up at present, but my instinct tells me that the Euro, and perhaps also the British Pound, will be the best instruments to pair against a weaker U.S. Dollar, while a strengthening U.S. Dollar in the opposite scenario would be most likely to do well against the Japanese Yen. Gold and Silver have also begun to sell quite heavily, so there could also be potential shorts there.

Adam Lemon
About Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.

 

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