Do fundamentals even matter right now?
There’s a good chance we could hear two things that would normally sink the dollar in the next 18 hours — that the Fed is still reasonably dovish and that inflation is low.
The FOMC minutes are due at 2 pm ET (1900 GMT). There will surely be worries about inflation and most of the Fed members will preach patience on raising rates. (Full preview of the FOMC minutes here). That’s something that normally hurts a currency.
Tomorrow, the US Bureau of Labor Statistics will release CPI data at 8:30 am ET (1330 GMT) and October prices are expected to rise just 1.6% y/y; a slowdown from 1.7% September. Even the highest estimates see inflation well below the Fed’s 2.0% target. Again, it’s something that normally hurts a currency.
A more-dovish Fed minutes or lower CPI might spark some dollar selling, but for how long?
Ultimately, if you’re selling the US dollar, you’re buying something else and even if the Fed is dovish and inflation low, it doesn’t matter because the Fed still won’t be as dovish as other central banks and inflation won’t be as low (or trending lower).
This is a genuine US dollar bull market and right now that’s basically all you need to know about fundamentals. We’ve had so many negative-USD headlines in the past 2 months and the dollar has steamrolled them.
Trading in this environment is about finding a good level to buy dollars and hanging on for dear life.
US dollar index – get on, hang on
