A delayed reaction to Friday’s non-farm payrolls report as well as the market’s expectation for today’s FOMC minutes, has taken the US dollar higher against every major currency today. Today’s FOMC minutes will conclude the September 18th monetary policy meeting, where the U.S central bank lowered both the Fed funds and discount rate by 0.5% each. The credit market has relatively stabilized since the rate cut and there have been no new outburst in the financial sector. After the last appreciation of the USD, the FED is not likely to cut rates again. After all we need to remember that weak USD fuels growth is U.S economy. In fact, recent economic data including non-farm payrolls could give the Fed the luxury of waiting until December before lowering interest rates again.
Towards the end of the week, our focus will turn to the US Trade Balance, Inflation and Consumer Spending. The weakness of the US dollar should help to narrow the trade deficit while boosting inflation. Consumer spending is the biggest potential market mover this week (it is not due out until Friday). The strength of payrolls in September and the upward revision to retail sales in August suggest that retail sales could be stronger than the market is currently expecting. Overall, it seems to be shaping up to be a dollar positive week.
Hopefully by the end of this week, it will be clearer as to whether this is just a correction or truly the anticipated reversal for the greenback.
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