Talks About Fed Tightening Buoy US Dollar

The US dollar bounced today, rising for the first day in six against the US dollar, as traders continued to speculate about prospects for an interest rate hike from the Federal Reserve.
John Williams, San Francisco Fed President, added his voice to the chorus of policy makers who want to continue monetary tightening sooner rather than later. He said yesterday:

In the context of a strong domestic economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later.

It is an interesting statement, considering that previously Williams was vouching for necessity of caution in regards to monetary policy. Just recently, several other Fed members, including New York Fed President William Dudley and Atlanta Fed President Dennis Lockhart, were talking about the need to resume rate hikes in the near future.
Despite all the hawkish comments, the CME FedWatch page shows that probability of a December hike is just marginally above 50%, and chances for a raise earlier are even lower. Fed minutes released earlier this week showed that policy makers were divided in regards to timing of a next rate increase, making it hard for speculators to predict Fed’s future moves.
EUR/USD dropped from 1.1353 to settle at 1.1327 today, touching the low of 1.1303 intraday. GBP/USD declined from 1.3164 to 1.3079. USD/JPY went up from 99.87 to 100.13.

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