USD: Is the currency oversold? – Rabobank

By FXStreet Jane Foley, Research Analyst at Rabobank, suggests that the futures are implying a stronger risk of a US rate hike this year on the back of yesterday’s slew of hawkish commentary from Fed officials.

Key Quotes

“Not for the first time the prospects of two or even three Fed rate hikes was mentioned by FOMC members, though neither Kaplan, Lockhart nor Williams are currently voting members of the committee. In tune with the move in the futures market the USD index has extended its May recovery and it now trading at its best levels in around 3 ½ weeks. That said, while the market ascribed probability of a June or July rate hike has increased, it remains low. This suggests that a summer policy move from the Fed would likely trigger a brutal reaction in the USD.

While the Fed may have adopted a very cautious position with respect to policy tightening, we concur with the sentiments of many Fed officials that the market could be significantly under-pricing the risks of a policy tightening from the Fed this year. Even for those who predict little risk of a Fed move this year, a long USD position could look now attractive since the …read more

Source:: FX Street