USD in focus
The FOMC did signal a pause in rate cuts at their October rate meeting. However, it was also made clear that the Fed was not about to start hiking interest rates either. The latest minutes confirmed what Fed speakers had been communicating that the Fed would be on hold for the medium term. The present market pricing is a 94.8% chance of no change for the December meeting. However, the general outlook for US monetary policy is bearish with a 51% chance of a 25bps rate cut by June 2020 and a 72% chance of a 25bps rate cut by December 2020. The outlook for US Monetary policy is bearish into next year.
However, the main driver of the USD is going to be the US-China trade negotiations. Reading between the lines you sense that President Trump is quite happy with China squirming on the uncertainty of the latest negotiations. A negative twist will see USD strengthen as its safe haven status comes to the fore, although the current sentiment this am is that China's crackdown on Intellectual Property theft, by raising penalties, is a nod towards meeting some key US demands.
