Fed hike fears on Friday reversed by dovish Brainard rhetoric today
If you combine Friday and today, the picture is still US dollar strength.
That doesn't necessarily make sense, given that Brainard has crippled September hike odds. They're now at 22% compared 29% on Friday and 27% on Thursday.
So the next question is: Is the dollar selling over?
I don't think it is yet. There's a key report on US retail sales Wednesday and some great numbers could put a hike back on the table so that's something to watch. But barring anything shocking, the chance of a hike is probably headed to 0%. A November hike is unthinkable four days ahead of the election so that will put us into wait-and-watch mode for December.
The problem with selling the US dollar is that you need to buy something else. I think gold can do well because it doesn't have the same negatives as everything else.
In FX land, EM and high yielders are probably going to be the winners. The kiwi was on a nice run until the past few days but it should be able to get back up on its feet now. The declines today and Friday were (admittedly roughly) supported by the July lows and I expect to see a slow grind back up to 0.7500.
