Dovish FOMC Rate Hike to Rattle USD/JPY Rate Recovery

Dovish FOMC Rate explained by professional Forex trading experts the “Dovish FOMC Rate” FX trading team.

Dovish FOMC Rate?

The 228K expansion in U.S. Non-Farm Payrolls (NFP) may encourage the FOMC to raise the fed funds rate to a fresh threshold of 1.25% to 1.50% as the economy appears to be approaching full-employment. However, the below-forecast reading for Average Hourly Earnings may force the committee to adopt a more cautious tone as many officials note ‘that continued low readings on inflation, which had occurred even as the labor market tightened, might reflect not only transitory factors, but also the influence of developments that could prove more persistent.’

With that said, market participants pay increased attention to the U.S. Consumer Price Index (CPI) as the headline reading is anticipated to pick up to an annualized 2.2% from 2.0% in October, but another 1.8% print for the core rate of inflation may ultimately dampen the appeal of the greenback as ‘a decline in longer-term inflation expectations would make it more challenging for the Committee to promote a return of inflation to 2 percent over the medium term.’
As a result, the FOMC may largely endorse a wait-and-see approach going into 2018, and a growing number of Fed officials may trim the longer-run forecast for the benchmark interest rate as ‘many participants observed that there was some likelihood that inflation might remain below 2 percent for longer than they currently expected.’ Forecasts pointing to a more shallow path for the benchmark interest rate is likely to rattle the near-term rebound in USD/JPY, with the pair at risk of exhibiting a more bearish behavior over the remainder of the year as the Fed runs the risk of concluding its hiking-cycle ahead of schedule

Dovish FOMC Rate Conclusion

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