The implied probability of a December Fed hike is not waiting for the FOMC Minutes and has already risen from around 64% to nearly 72%.
That’s thanks to more hints of a “lift off†in December by a few Fed officials. Did we get thicker hints? The EUR/USD correction seems to be nearing an end.
Jeffery Lacker said there is a stronger case for a rate hike. That’s not a huge surprise as he had already voted for a hike in September. He even expressed worries about the Fed getting behind the curve.
Denis Lockhart, another member that leans to the hawkish side, said there is more data to evaluate before the December liftoff. While everybody is data dependent, the mention of a “December liftoffâ€Â seems to make it a given.
The most important comment came from the most important speaker of these three. No. 3 at the Fed, NY Fed President Bill Dudley, said that when a Fed liftoff comes, it won’t be a big surprise and also that he is confident that they are ready for the normalization process.
Is he also preparing us for hawkish meeting minutes? The decision was relatively bullish, and since then we had the strong NFP report. Also remember that the Fed edits those minutes until the last moment, making them somewhat less stale than perceived.
EUR/USD, that enjoyed a nice recovery, is back to the lower end of the range. Also other currencies are losing ground to the greenback with USD/JPY challenging the highs, NZD/USD falling below support and AUD/USD trading at the bottom end of the range.
