CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
Established in 1974
Clients across 156 countries
15,000 markets worldwide

The Greenback takes a break after robust rally

Officials from the US Fed are sending different signals to traders

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
bg_usd dollar united states new 11

The U.S. currency started the week in red, trading lower against most major counterparts after managing to break key resistance level last week. The dollar index dropped 0.3% to trade below 97 as U.S. bond yields declined against the yield curve with yields on 10 years notes trading 16 basis points lower.

Central banks continue to be the major drivers of markets with European Central Bank signalling last week that more stimulus to come and China on Friday cutting key interest rates for the fifth time in 2015.  While the dollar gained its momentum as divergence in monetary policies are back to the headlines, Wednesday will be a test on whether the rally likely to resume as the Federal Reserve meets to decide whether it’s time to hike rates.

Officials from the US Fed are sending different signals to traders, and Fed Janet Yellen is likely to face a split among her colleagues as they head into Tuesdays meeting. According to markets participants they see less than a 6% chance lifting rates on Wednesday so the key question is not whether the Fed starts tightening monetary policy on 27-28 Oct meeting, but will the Fed send a strong signal for tightening in 2015?

Looking into recent economic data releases, the housing sector is doing pretty well. Existing home sales is one of the bright spot in the economy surging in September by 4.7% to a seasonally adjusted annual rate of 5.55 million, putting the market on pace for best year since the financial crisis.

Inflation, manufacturing, exports, jobs and wages aren’t very convincing, and this is why two Fed governors, Lael Brainard and Daniel Tarullo joined the doves who’re aiming for 2016 tightening.

We continue to be long-term dollar bulls, but a pullback from recent rally can’t be ruled out especially with the FOMC meeting and key economic data due to be released this week.

On the U.S. calendar for the week:

Monday: September New Home Sales

Tuesday: Durable Goods Orders, CB Consumer Confidence, Services PMI, Richmond Manufacturing & Services Index

Wednesday: MBA Mortgage Applications, Goods Trade Balance, and FOMC rate decision

Thursday: Continuing Jobless Claims, Q3 preliminary GDP, Consumer Spending and Pending Home Sales

Friday: Core PCE Price Index, Employment Cost index, Chicago PMI, Michigan Consumer Sentiment & 5-Year Inflation Expectations. 

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.  Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. 

CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.