{"id":38178,"date":"2017-02-23T00:27:51","date_gmt":"2017-02-23T08:27:51","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=38178"},"modified":"2017-02-23T00:27:51","modified_gmt":"2017-02-23T08:27:51","slug":"the-u-s-dollar-fails-to-benefit-from-expectations-for-an-earlier-fed-rate-hike","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2017\/02\/23\/the-u-s-dollar-fails-to-benefit-from-expectations-for-an-earlier-fed-rate-hike\/","title":{"rendered":"The U.S. Dollar Fails To Benefit From Expectations for An Earlier Fed Rate Hike"},"content":{"rendered":"

Perhaps the shift was not large enough. Perhaps it was the magnetism of the 50-day moving average (DMA).<\/p>\n

After the Federal Reserve released the minutes from its last meeting on monetary policy<\/a>, the U.S. dollar index (DXY0) promptly weakened. The dollar closed the day marginally lower after trading for a small gain in the morning. Yet, the odds for the timing of the next rate hike shifted from June to May.<\/p>\n


\n
\"The<\/a>
The U.S. dollar index (DXY0) has closed just once above its 50DMA since January 13th. The dollar has churned just below this critical resistance for the past two weeks. The Fed minutes did nothing to resolve the stalemate.<\/figcaption><\/figure>
\nSource: FreeStockCharts.com<\/a><\/strong><\/p>\n

\"The<\/a>
The odds of for a Fed rate hike in May shifted from 45.9% to 51.1%. The odds for the next rate hike to occur in June have recently hovered around 70%.<\/figcaption><\/figure>
\nSource: CME Group FedWatch<\/a><\/strong>
\n<\/center><\/p>\n

The odds for a rate hike in May increased from 45.9% to 51.1%. A reading above 50% means more likely than not. In this case, the chance for the timing of a rate hike are just slightly in favor of May. The move is relatively small, but, in my mind, the crossing of the threshold looms large. All else being equal, the shift should<\/strong> have given the U.S. dollar a boost. The currency market clearly does not (yet?) agree with me. I will be watching closely going forward for new developments in the correlation between the 30-day Fed fund futures. <\/p>\n

<\/p>\n
\n

Given context setting of #FOMC<\/a> minutes & recent data, #markets<\/a> implied probability of a March hike seems too low.50-60% appears more approp.<\/p>\n

— Mohamed A. El-Erian (@elerianm) February 22, 2017<\/a><\/p><\/blockquote>\n