The US dollar is on the rise, extending its previous recovery. Will Yellen send it lower?
Here is their view, courtesy of eFXnews:
The focus today for USD traders shifts to Chair Yellen’s speech where ING FX Strategy Research notes its title contains the word ‘uncertainty’ which is the equivalent of ‘Kryptonite’ for currencies.
“The Fed story is a major risk to the dollar this week. We suspect markets may have misinterpreted the signal from the dots with the market-implied probability of a December rate hike shooting up to 60-65%. Fed talk this week – including a speech by Chair Yellen – may show that the dots are not a firm commitment to a December rate hike.
We think that the flattening bias in the US rate curve is set to remain in place – especially with Fed officials downgrading their neutral rate estimates by 25bps and signalling greater uncertainty over the extent of current hiking cycle.
The bottom line is that chasing dollar strength on any Fed tightening hopes has limited upside potential and will ultimately prove unfruitful,†ING argues.
For lots more FX trades from major banks, sign up to eFXplus
By signing up to eFXplus via the link above, you are directly supporting Forex Crunch.
