Forex analytics. The dollar’s appetite has been ruined – ForexNews.PRO
Risk aversion. This is how the markets reacted to the completion of the shutdown. Stock indexes have moved to the stage of selling facts, and the “hawkish” rhetoric of FOMC officials has added fuel to the fire of the fall of the S&P 500. The chances of a federal funds rate cut in December have dropped below 50% at some point in time. However, instead of strengthening, the US dollar weakened. It is now perceived as a risky currency, and the closing of carry transactions by traders has pushed up the EURUSD quotes to two-week peaks.
According to Bank of America, after the completion of the Forex shutdown, the volatility and sensitivity of the US dollar to rates will increase. We are talking about two factors, each of which will pull the USD index in its own direction. An increase in the volatility of quotations of foreign exchange market instruments is a reason for players to close positions on the difference. They have recently filled their pockets quite well, taking advantage of the attractiveness of greenback due to high rates.
On the contrary, the overestimation by the futures market of the chances of lowering the federal funds rate from 72% to 52% over the past week should have supported the “bears” on the EURUSD. She didn’t. Why?
In the absence of data, investors have to rely on the opinions of authorities. FOMC officials are increasingly talking about the need to keep borrowing costs at the same level and express concern about inflation. Even Mary Daly, the president of the Federal Reserve Bank, who advocated a rate cut a week ago, now claims that December will be a lively meeting. There is still a lot of time before the last meeting in 2025. And a lot of data.
On the contrary, 84 out of 105 Reuters experts are confident that the Fed’s monetary policy will ease at the end of the year. 70% of the survey participants believe that the labor market has remained as cold as in the summer. According to the remaining 30%, his condition has worsened. Due to the shutdown, the US economy risks slowing to 1% in the fourth quarter. The second was 3.8%, and the third is expected to be 2.9%.
Thus, derivatives assess the chances of a December cut in the federal funds rate as fifty-fifty due to a split in the Fed ranks. However, most of the Reuters experts disagree with them. The market does not know where to go, and in such conditions it focuses on reducing risk appetite and increasing volatility. As a result, the US dollar gets into a wave of sales.
