In the United States, the ADP Employment Report is scheduled to release today. This report provides a preview of Friday's labour market report. This report along with the one for November will determine whether or not the Fed will hike rates in December, says Commerzbank.
On numerous occasions this year good data was not enough to cause the Fed to hike rates. The Fed was simply dissatisfied with the overall situation. And no doubt the FX market is likely to account for a significant share of this overall situation.
"If the Fed initiates its rate hike cycle the dollar is expected to benefit from this move. Currencies with a relatively expansionary monetary policy should then depreciate against the dollar. Thereby, the monetary situation in these countries would improve without the central banks having to take further expansionary measures", states Commerzbank.
The Fed has prepared itself in order to handel difficult situation. The central banks of Japan, Australia, New Zealand and probably also the ECB all seem to hope that the Fed will do their work for them through the exchange rate.
"The Fed is waiting for the best chances of cutting this Gordian knot, if inflation plays along and the Fed hikes rates despite the expected dollar appreciation this would cause. The risks in EUR-USD are pointing downwards", added Commerzbank.
