020 7898 0500The US was back in the market after its Columbus Day public holiday and once again we saw the dollar strengthen on very little economic data. The main driver for this prolonged strength is the speculation that we will see interest rates increase in December. While there is a Federal Open Market Committee (FOMC) meeting in November, it is very unlikely due to the political ramification of a rate hike, with the Presidential Election only a few days later. Instead, we expect to see the FOMC signpost a rate hike at this meeting, rather than raise rates at the time.
In the meantime, the recent surge in oil will boost energy costs and spur a Federal Reserve hike as this is likely to translate into inflation down the road. Oil is now trading at a near a fifteen-month high after plummeting earlier in the year. Chicago Federal Reserve President Charles Evans was noncommittal in his comments regarding an interest rate hike and stating, “December could be an appropriate time to do it, but I don’t see any urgency either.” The important issue to identify with here is that it is being discussed.
The day ahead is packed with high importance events. Along with a couple of FOMC members speaking we also have Job Openings and Labour Turnover Summary (JOLTS) data, which will give the market another handle on the employment health.
However, the most important economic release are the FOMC minutes from their last meeting. If there is any derivation from the information relayed in the post meeting press conference the market will be subject to enhanced volatility especially if the FOMC signpost a December rate hike.
