Currency traders continue to flock to the U.S. dollar with confidence. Tuesday morning the currency stretched to 11-week highs, rattling various currency pairs under the notion that a U.S. Federal Reserve interest rate hike is bound to occur before the end of the year.
U.S. bond yields have followed suite. 2-year yields have risen up 4 basis points reaching 0.87 percent while 10-year treasury yields jumped 5 basis points to 1.77 percent.
The current surge in investor confidence is due in part by semi-hawkish comments made by Chicago Federal Reserve Bank President Charles Evans on Tuesday morning, who signaled he "would be fine" with raising interest rates, so long as the economy and inflation remain stable.
These comments come a day before the Wednesday release of the minutes on the Federal Reserve Open Market Committee, where investors will anxiously look on to see just how close the Federal Reserve was to hiking rates in September.
The is responding by rallying over 0.5 percent to 97.48, a level not touched since the end of July. The dollar is higher than each of its major trading counterparts, with New Zealand's dollar dropping a whole 1 percent to $0.7060, while the British pound suffered an 0.8 percent draw down, further compounding well below its 31-year low of $1.1491.
According to Oanda's Craig Erlam, the pound's 4 percent single week drop can be attributed to continuing investor uncertainty surrounding Brexit. "Further turbulence likely lies ahead for the pound," says Erlam.
According to some analysts, the U.S. dollar's upward momentum can also be explained by the increasing doubts surrounding Donald Trump's ability to become U.S. President, doubts which have surged since Congressman Paul Ryan's decision to withdraw his immediate support of the Presidential candidate.
Not everyone agrees with this politic-based assertion. Sonja Marten, strategist at DZ Bank, claims "Politics is difficult for the dollar these days, I don't know if the market has quite made up its mind about what to make of a possible Trump victory."
The Federal Reserve meets again on Dec. 13-14. According to the CME's FedWatch tool, the tallied investor confidence in an interest rate hike has risen to 70 percent, which is 4 percent higher than what was read on Friday.
Fed fund rates were raised in Dec 2015 for the first time in eight years, signaling progress. But with an increasingly divided Federal Reserve, and with three key members maintaining a dovish stance in September, will December be the month that interest rates are raised, or is this simply another case of the "Fed who cried growth?"