Waning Fed Expectations Pressuring U.S. Dollar Index
San Francisco (Oct 7) The U.S. dollar has been under pressure in recent days after Friday’s weaker-than-forecast U.S. nonfarm payrolls report led to a belief among many traders that the Federal Reserve will not raise interest rates in 2015, says optionsXpress. Traders exited long positions that were established on the basis of higher U.S. interest rates in the coming weeks. “While we have seen many Fed officials continue to talk of the likelihood of a rate hike at the December Federal Open Market Committee meeting scheduled for mid-December, mixed economic data on top of the weak jobs number may be enough to convince the Fed to maintain the current accommodative rate policy into 2016,” optionsXpress says. “Fed funds futures traders have all but nixed the possibility of a rate hike at the Oct. 27-28 FOMC meeting, with the October Fed funds futures pricing-in only a 6% chance of a rate hike. For December, the odds of a rate hike increase, but futures are only looking at a 31% probability at the December meeting. It is not until the March 2016 meeting where the Fed Funds futures are looking at an over 50% chance of a rate hike.” Metals traders keep tabs on the dollar since base and precious metals alike often move inversely to the U.S. currency. The December dollar index was trading at 95.540 as of 11:15 a.m. EDT compared to a close last Thursday (prior to the jobs report) of 96.326.