It is becoming difficult to see the direction of the dollar exchange rate this week. Market attention is focused on changes in the Fed’s interest rate hike stance. Following a series of slowdowns in U.S. inflation indicators, there is a growing consensus in the market that the pace of future interest rate hikes will slow down. The next FOMC meeting in December is likely to raise interest rates by 50 basis points, which is expected to slow down from four consecutive 75 basis point hikes. The problem is to what level interest rates should be raised in order to fight inflation, and the outlook for the terminal rate (final interest rate level). Yesterday, Bullard, who is known as a hawk, predicted at least 5% and possibly as high as 7%. The pace of interest rate hikes is slowing down, while expectations for the final interest rate level are raised. It is still unclear how long interest rates will continue to rise.
In response to this situation, the strength and weakness of the dollar exchange rate are at odds. The flow of dollar selling has stagnated following a series of slowdowns in US inflation indicators, and geopolitical risks have also added to the movement of dollar buying. Although the market is still volatile, it seems that a large trend is gradually becoming less likely. It is a nervous atmosphere that reacts to the remarks of US financial officials and the outstanding results of US economic indicators from time to time.
This week, we are being swayed by headlines and economic indicators.
