USD: Wary of the ‘buy the hawkish rumour, sell the dovish fact’ Fed noise - ING

Ahead of the Fed tomorrow, President Trump’s speech at the UN today may well dictate the headlines, suggests Viraj Patel, Foreign Exchange Strategist at ING.

Key Quotes

“There has been a limited fallout in global markets to flaring North Korea-related geopolitical risks and we attribute this to investors viewing a diplomatic solution as a highly likely outcome. With the President’s speech set to test this assumption, we wouldn’t be surprised to see caution in markets today.”

“Turning our attention to the Fed meeting, we are now seeing the typical ‘buy the hawkish rumour, sell the dovish fact’ type of USD price action and we still expect the dollar to resume its weakening trend once this week’s Fed noise dissipates. Indeed, we have only seen the USD rally on 2 out of 15 occasions post Fed meetings – both of which involved some form of the signal that a rate hike was ‘appropriate soon’. This may be the only phrase that we think could unlock further USD gains; given the uncertain inflation backdrop, it just seems too early for a firm commitment to a December rate hike. Tactically, we prefer to fade this USD corrective rally.”