Dollar Volatility Will Pick Up Ahead of the Fed Minutes


The next big data point for currency trading on the U.S. docket is the FOMC Minutes. As for the Fed, many traders are looking for the Minutes to suggest a more patient approach to rate hikes, in contrast to the hawks who want to see a faster pace of normalization. There is also a lot of inflation, production and housing data on tap, but those numbers are likely to take a back seat to the prognostications of the Fed.

The expectation for a dovish leaning from the FOMC is a function of the shift in the language in the October policy statement. Additionally, the recent Meeting Minutes should reflect both sides of the inflation argument, but the soft side could dominate, consistent with comments from many of the doves who still point to the failure to meet the inflation mandate and that it will be quite some time before prices are rising at a better than 2% clip.

The FOMC is also very cognizant of the impact of the stronger dollar, as well as the downward trajectory of global prices, especially with energy prices on the decline. Policymakers also do not believe they are behind the curve, as wage inflation and housing prices remain stagnant.

The U.S. Economic calendar kicks off with the Empire State index (Monday) forecast to rebound to 10.5 in November from 6.2 in October. Industrial production is expected to rise 0.2% in October vs 1.0% in September, while capacity utilization is seen remaining unchanged at 79.3% from 79.3%. Headline PPI is projected to sink 0.2% in October vs -0.1%, while core PPI is seen rising 0.1% vs unchanged.

The dollar has been buoyed against most major currencies, experiencing the most volatility against the Yen after Monday’s worse than expected Japanese GDP print which showed that Japan is now officially in recession.

The post Dollar Volatility Will Pick Up Ahead of the Fed Minutes appeared first on Forex Circles.

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