Forex today: FOMC sounding optimistic once again, sends dollar higher, again

  • Forex today was dominated by the FOMC that sounded optimistic once again, setting up a December rate rise and propelling the dollar higher across the board.

As analysts at Westpac explained, "The Fed held steady but sounded optimistic once again, setting up a December rate rise." The DXY was firmer to 96.74 and the commodity complex felt the pain with oil prices falling again, now down to a near 3 month low. As for yields, the US 10yr treasury yield ranged sideways between 3.21% and 3.23% and the 2yr yields ranged between 2.94%/2.96%. the Fed fund futures yields continued to price the chance of another rate hike in December at 80% following the FOMC statement: FOMC statement - November 8 - full text

Currency action:

EUR/USD dropped from 1.1447 for a hard landing down to 1.1352 with the Italian news doing the job for the bears. The European Commission has challenged Italy’s optimistic growth outlook with a damning assessment of Rome’s planned flat tax and a basic income for the poor. The Commission warned in its fall economic forecast that the policies that Italy’s coalition government plans to implement mean the country’s growth outlook “is subject to high uncertainty amid intensified downside risks.” GBP/USD took a similar path and fell from 1.3150 to a low of 1.3045 after less positive Brexit news whereby UK's Hunt said a Brexit deal within 7 days would be "pushing it". Mixed headlines this week has now left prospects of a Cabinet Brexit meeting is unlikely before next week while the Irish foreign minister has urged caution on Brexit breakthrough. As for the cross, EUR/GBP initially rallied to a high of 0.8738 before falling back towards earlier Europen lows at 0.8691, hitting 0.8695 and settling in NY at 0.8701. USD/JPY rose from 113.60 to 114.00 to score a one-month high with the widening of UST-JGB yield spreads across the curve-supporting the upside. AUD/USD bulls flaked off from the 0.73 handle again and the price fell to 0.7247 weighed down by the broad USD bounce, while NZD/USD ranged between 0.6770 and 0.6795 before falling to 0.6750 post-FOMC. 

Key notes from the US session:

Key events ahead: 

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