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Fed Comments will be the Key Today

Today, three Fed presidents, and a FOMC member will speak. It will likely cause volatility for the dollar and major currency pairs. We will also see the release of the US Markit Manufacturing PMI for October, at 13:45 GMT.

The New York Fed president Dudley, and the St Louis Fed president Bullard, will speak at 13:05 GMT today. Dudley made a hawkish comment last Thursday. Bullard said a rate hike this year the ‘base case’ on 30th September. They will likely re-state the previous hawkish comments today. If so, the dollar may firm again.

Chicago Fed president Evans will make a speech, at 17:30 GMT. He said two weeks ago, that he sees no urgency for a December rate hike, as the inflation still remains below the Fed’s 2% target. If he also re-states a dovish comment today, then it will likely restrain the bullish momentum of the dollar.

The last speech today will be made by the FOMC member Powell, at 18:00 GMT.

The dollar index surged 1.17% in two days, last Thursday to Friday, to a seven-month high at 98.79. The rally was helped by the increase in market expectations of a December rate hike.

The latest polls, surveyed after the third presidential TV debate, shows that Clinton leads Trump, by 50 to 38 percent, her highest lead to date. Trump possesses an extreme political and economic stance, and is in favour of a weak dollar. If he wins, it implies immeasurable uncertainties for the US prospects. In comparison to Trump, Clinton seems to be more secure and predictable, implying less risks. As a result, when Clinton leads, the dollar is likely to rally. The November Fed interest rate decision will be announced on 2nd, It seems to be unlikely for the Fed to raise rates before the outcome of the presidential election.

Recent Fed members comments have escalated market expectations of a December hike.The Fed Vice Chair Fischer has warned that low rates can lead to longer and deeper recessions. The New York Fed president Dudley commented that the Fed will likely raise interest rates later this year, if the US economy remains on track. Initial Jobless Claims and Philadelphia Fed Survey figures last Thursday, indicating the US labour market and economy still remain sound.

Meanwhile, the ECB president Draghi stated last Thursday that If necessary, the large-scale asset purchase programme will last longer than scheduled, until the inflation reaches the ECB’s target. The statement weighed on the Euro, and lifted the dollar.

The release of Initial Jobless Claims and Philadelphia Fed Survey figures last Thursday, indicating the US labour market and economy still remain sound.

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