Expectations for the US dollar are dwindling today as Forex traders question the impact of a Fed rate hike in December, and as uncertainty over whether or not December’s rate hike will lead to further hikes sets in.
The US dollar has been rallying the last couple of days, heading higher as December — and the expected Federal Reserve rate hike — draws near. However, now some glimmers of uncertainty are showing through in trading and the greenback is pulling back after its gains.
First of all, to some degree December’s hike has already been priced into the market. Many expect Janet Yellen to make an announcement, and that expectation is already influencing Forex trading. The next rate has mostly likely had its effect.
The question now is the pacing of subsequent rate hikes. In that area, there is a great deal of uncertainty that is weighing on the greenback. Fed policymakers will have to see how the December hike impacts the US economy, as well as take into account performances of other currencies since the dollar doesn’t want to strengthen too much too fast.
At 14:03 GMT EUR/USD is up to 1.0736 from the open at 1.0715. GBP/USD is up to 1.5191 from the open at 1.5117. USD/JPY is down to 123. 0100 from the open at 123.2270.
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