Dollar falls despite December rate hike expectation

19 November,, Lagos – Forasmuch as the Federal Reserve meeting minutes released yesterday, we expect a carry over of volatility as markets price in the perceived effect of the minutes. The USD dipped in the overnight trading sessions, despite the obvious stance from the Fed that rates could very well be raised next month.

We expect the dollar to be majorly driven by this today. We also have the UK retail sales, along with other high impact news from the US.

Fed meeting minutes

Despite the fact that the report showed strong support for a possible December rate hike from officials, the dollar fell overnight. The dip could be attributed to the argument concerning whether the U.S. economy’s long-term potential may have permanently shifted lower. However, it remains clear that policy makers feel more confidence in the economy than previously felt in the September meeting.

“The U.S. financial system appeared to have weathered the turbulence in global financial markets without any sign of systemic stress,” the minutes said. “Most participants saw the downside risks arising from economic and financial developments abroad as having diminished and judged the risks to the outlook for domestic economic activity and the labor market to be nearly balanced.”

With the clarification of a high possibility of a December lift off, it is only a matter of time before the dollar resumes its strength.

UK retail sales (9:30 A.M GMT)

The change in the total value of inflation-adjusted sales at the retail level is forecast to come at -0.4 percent. This is potentially the lowest since April, as consumer spending seems to wane. This could add to the weak inflation figure released earlier in the week.

The sterling has been mixed against its major counterparts this week. A weak retail sales reading is expected to put more pressure on the currency.

US unemployment claims (1:30 P.M GMT)

The general trend of unemployment claims remains positive, despite the last two week’s figures coming below forecast. It is now expected that the jobless claims will come at 272k for the previous week. The Philly Fed Manufacturing Index is also due for release, forecast to come at 0.1. A potential rebound from two months of negative reading.

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