USD/CHF: Buy At 0.9770
- Chicago Federal Reserve Bank President Charles Evans said he "could be fine" with the Fed raising rates in December, but he wanted to see how the economy and inflation progressed before deciding. Indeed, he cautioned that it might be better to wait for inflation to rise closer to the Fed's 2% target before moving. Evans has repeatedly expressed concern on the U.S. central bank's preferred measure of inflation moving back to its target rate. It currently stands at 1.7%. Evans in his speech said any rise in inflation above the current target would be minimal in the current environment so "if it became necessary, policy wouldn't have to do much work to lower inflation expectations back down to 2%."
- The Chicago Fed president does not have a vote this year on Fed policy but will become a voting member in 2017. Still, currently he does participate fully in deliberations.
- Traders currently predict a roughly 70% probability that the U.S. central bank will raise rates at its December meeting. Investors are looking to Wednesday's release of minutes of the latest Federal Reserve Open Market Committee meeting and Janet Yellen’s speech on Friday to see how close the Fed was to hiking rates last month.
- The dollar hit an 11-week high against a basket of major currencies on Tuesday . We have raised our USD/CHF bid to 0.9770, near 14-day exponential moving average.
AUD/NZD: Stay Bullish
- New Zealand's central bank reiterated on Tuesday that further policy easing will be needed to ensure that the inflation rate increases and settles near the middle of its target range.
- The central bank is mandated with keeping annual inflation at between 1 and 3%. The annual rate was 0.4%in the second quarter. In a speech, Assistant Governor John McDermott said that September quarter inflation, to be announced October 18, is expected to be low.
- The central bank kept the official cash rate on hold at 2.0% in September but left the door open for more rate cuts. McDermott said: “Our current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range.”
- The assistant governor's speech has sparked a new bout of selling on the NZD as traders continue to price in a rate cut at their November meeting. We stay bullish on the AUD/NZD.
Source: GrowthAces.com - Daily Forex Signals