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Patterns in the Dollar Concerning FOMC Decision

The US Dollar eased back during the week as FOMC meeting minutes revealed that the Federal Reserve could very well look towards hiking rates in December. Although nothing is set in stone just yet, the profit taking in the dollar points to downside risks considering its overbought trade conditions, in the run up to the December decision.

Weekly Review

The Euro turned slightly weaker last week, losing -0.87% as dovish comments from ECB Chief Mario Draghi kept pressure on the single currency. Using his various engagements as opportunities to speak over the week, the ECB Chief signaled that with any slack in inflation, the ECB is likely to come out strongly in favor of expanded easing during the December meeting despite some opposition from Jens Weidmann. The ECB's continued dovish rhetoric kept the Euro weaker across the board with the markets expecting to see the ECB launch yet another bazooka at the meeting in December, after Draghi commented that the ECB "…will do what it must" to stoke inflation. The EURUSD pair hit a new 6-month low last week at 1.0616 as prices bounced back softly off the lows but closed near 1.0640 by Friday’s closing session. On the other hand, Fed officials stuck to their hawkish ground with some members such as William Dudley commenting that the Fed would soon be ready to raise rates.

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The Week Ahead

Data from last week also included inflation numbers across the Eurozone, UK, US and Canada. Inflation managed to tick modestly higher across the regions indicating that there could be scope in the markets adjusting to low oil prices. In the US, consumer inflation was up 0.20% from the previous month's decline of -0.20%, while in the UK the annualized core CPI increased 1.10%, seeing a modest improvement from 1.00% inflation growth a month ago. Canada's core inflation also ticked higher, rising 0.30% for the month, up from the earlier 0.20%. The WTI crude oil benchmark remained subdued over the week with prices posting a modest gain of 2.39% and settling at $41.54 by Friday’s close, after a brief test to $39.89 earlier during the week.

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