Dollar Broadly Firmer After FOMC; Markets Look For Mid-2015 Rate Hikes

Washington (Oct 30)  The Federal Open Market Committee delivered an upbeat message on the U.S. economy, markets are again looking for rate hikes around mid-2015 and the dollar is firmer, says Brown Brothers Harriman. In a post-meeting statement Wednesday, the Fed highlighted an improving labor market and downplayed the recent drop in inflation expectations.

“The pendulum of sentiment regarding the U.S. economy and Fed tightening had swung too negatively, and now we are likely to swing back the other way,” BBH says. “U.S. rates are reflecting this already, with the 10-year UST (U.S. Treasury) yield back above 2.30%.

The dollar is bid across the board, and we have stuck to the view that the Fed does not react to volatile high-frequency data.  As long as the economy is growing close to 3% and jobs are being created at roughly 200k per month, we see no need for the Fed to deviate from its perceived plan to hike rates near mid-2015. This remains dollar-positive.” As of 7:39 a.m. EDT, the euro was down to $1.25952 from $1.26350 late Wednesday.

Metals traders closely watch moves in the dollar since base and precious metals alike often move inversely to the greenback.

Source: KitcoNews