FX: Enjoy the Powell Break | article

Federal Reserve Chairman Jay Powell's comments about the federal funds rate being "just below", the neutral-level estimates have seen US rates and the dollar soften, offering another niche for investors. emerging market assets. The market is now planning a 60% chance of a Fed hike at the December 18th meeting and a single increase over the next year (in March). US swap rates are now at around 20-25 basis points from their highs earlier this month, which is comparable to the type of correction observed in May this year. While this correction may be a little more complex, our team prefers to stick to the prospect of three Fed rate hikes next year, suggesting that this fall in US rates and the dollar will only be temporary. . Expect a closer look at the minutes of the FOMC meeting tonight, but we also assume that the Fed will maintain its median long-term neutral rate expectation at 3.00% at its December meeting, thus reopening the leads to a more aggressive tightening cycle for 2019 We doubt that the dollar should be too low against low-yielding countries (especially given the context of taking into account US tariffs on imports of foreign products). automobiles), which probably means that the heavily weighted DXY in Europe finds support before the 96.00 / 50 area.