With the Fed nearly full priced for December, we believe that there is less support for the greenback on a good number unless it moves the needle on 2017 hikes. For that, Yellen could begin to lay out the foundation for further hikes at her speech today. We believe that she will confirm December is firmly on the table but she is unlikely to do little to move the needle on expectations for next year.
This means the USD is likely to trade sideways to weaker against the majors over the coming sessions. The DXY has rallied the past two weeks, eking out a near 2% rally. This also comes on the heels of a big drawdown in market positioning with the Fed, political uncertainty and steeper curves challenging the risk environment, which has also helped the USD. Still, some of the major political uncertainties have faded, and market positioning looks flat. Barring the idiosyncratic risks to GBP, this favors some pickup in the majors against the USD into the weekend.
Copyright © 2016 TD Securities, eFXnews™Original Article
