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Oct 05 - 09:55 AM

USD: Peak Fed Hawkishness, Again; Incoming Data In The Driver Seat - Credit Agricole

By eFXdata  —  Oct 05 - 08:53 AM

Credit Agricole CIB Research discusses the USD outlook and sees this week's incoming US data in the driver seat for USD near-term direction. 

"One the big themes in the FX markets so far this week has been the renewed reassessment of the prospects for aggressive Fed tightening in the coming months. Growing expectations that peak Fed hawkishness is behind us could explain the recent dip in UST yields and US rates. Furthermore, the US OIS curve signals that the markets are not expecting the Fed tightening cycle to peak at around 4.35% next year. This is down from 4.60% in the immediate aftermath of the September FOMC meeting," CACIB notes. 

"The key risk in our view is that the incoming US data – services ISM , jobless claims on Thursday and the NFP on Friday – could surprise to the upside, give US rates & yields a boost and put the latest rebound in risk appetite to the test. Equally, if the US data continues to underwhelm, the overbought and overvalued USD could continue to struggle as investors are looking for higher-yielding proxies," CACIB adds. 

Source:
Crédit Agricole Research/Market Commentary

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