Le dollar se renforce suite au consensus hawkish de la FED

Enrique Díaz-Álvarez19/Déc/2016Actualités

We have repeatedly stressed the crucial importance of the FED meeting in December and in particular the scatter plot, where each member of the committee gives his opinion on the rise in interest rates over the next 3 years. FX markets last week have fully validated our forecasts. The current rise in FED interest rates was a « non-event », as it was fully anticipated. On the other hand, the cloud of points communicated to the markets shows that the FED expects a rise in interest rates much faster than initially expected in September. The dollar strengthened on this news, and ended the week up against all G10 currencies. The biggest loser was the Yen, which is explained by the correlation between USDJPY and US interest rates.

The Euro is now very close to our forecasts for the end of 2016. The economic calendar remains little provided until January, and FX markets are generally very quiet in the second half of December during the Christmas holidays. We expect the dollar rally to continue in the first half of 2017 and break parity shortly after the New Year. This is justified by the rise in interest rates expected by FOMC members next year, While there is still no chance of a rise in Europe at least before 2018.


A succession of positive news in the UK last week allowed the pound to keep pace with most other pairs during the dollar rally. Bank of England still had a more hawkish speech than what markets expected, and retail sales also positively surprised us. Our forecasts of an increase in interest rates by the Bank of England are fully validated, although this will not happen for a few months. We remain convinced that the Book against the Euro rally still has a future.


Business confidence indices in Europe continue to climb and point to better growth in the coming months. The combination of the ECB’s very accommodating monetary policy and the depreciation of the currency will continue, according to our view, to support the economy in the Eurozone. However, for the coming months, volatility in the currency market will be determined by interest rate differentials, which is why this economic context is not sufficient, in our opinion, to change our outlook for a decline in interest rates. their. But better economic colors in the Eurozone in recent months are still to be notified.


As expected, the Fed raised interest rates by 0.25%, a unanimous decision. It also confirmed our expectations for a hawkish turnaround compared to our forecasts following the September meeting. The average projection of FOMC members for the rise in interest rates in 2017 is now 3 increases, compared with only 2 initially scheduled in September. There have also been modest upward revisions in projections of growth and employment.

This is undoubtedly bullish for the Dollars. We note that short-term interest rates in the US are still considerably lower than the Fed’s own expectations. As these expectations increase, the widening of the abyss in monetary policy on both sides of the Atlantic should weigh more on the EUR and reaffirm our forecasts of EUR / USD below parity First quarter of 2017.


Écrit par Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.