Dollar Firms on Fed Positioning
The U.S. Dollar is trading in positive ranges against major peers as Traders begin to position themselves ahead of the Federal Reserve’s interest rate decision on Wednesday afternoon.
The Fed is widely expected to keep interest rates on hold at 3.75% this week, but a plurality of Traders still anticipate that one further hike will materialize at the Fed’s December meeting. Despite Wednesday’s expected hold, the Dollar should be able to hold on to gains that have been made over the last several weeks as persistently high energy prices force the Fed and other central banks to maintain a hawkish stance. Brent Crude trades near $115 per barrel this morning, and WTI Crude near $101 per barrel.
What to Watch This Week…
- Federal Reserve Interest Rate Decision - Wednesday, 2pm
- U.S. Gross Domestic Product - Thursday, 8:30am
- Monex USA Online is always open
The complete Economic Calendar can be found here.
EUR
The Euro is down against the Dollar this morning due to concerns surrounding the French fiscal and political situation. Moody’s, a leading global credit rating agency, made the decision over the weekend to hold France’s sovereign credit rating at Aa3, the same as the United Kingdom, with a negative outlook. A hold there was previously expected to provide the Euro with some relief, but no meaningful reprieve has materialized as underlying concerns dominate. This is exemplified by the spread between French and German 10-year yields, which sits near 160 bps this morning, a level last seen nearly 15 years ago during the 2011 Eurozone sovereign debt crisis. More than 400,000 people protested over the weekend in France, further exacerbating political concerns.
MXN
The Mexican Peso is down nearly half a percent against the Dollar this morning as the surprise return to the Presidency of Brazil for Luiz Inacio Lula da Silva has resulted in a broad sell-off across Emerging Markets. Brazil and Mexico are Latin America’s two largest economies and consequently tend to trade with correlated sentiment. Brazilian assets are in free-fall this morning and the contagion has spread to Mexico, dragging the Peso lower, as Traders look to reduce their exposure to the region as a whole.