Fed signals a soon lift off

The Fed clearly prepared the markets for a lift-off in December yesterday. Fed, which, up to yesterday, had not really communicated well in recent times. But that has changed. The Fed made only minor ad-justments to its statement in comparison to September. 

It was less concerned about global turmoil, as the situation in the emerging markets has calmed down. But it said that it will determine "whether it will be appropriate to raise the target range at its next meeting". This is a clear signal that the long-awaited rate hike is likely in December. 

Of course, the decision will ultimately depend on the data released in the coming weeks, in particular price data and the labour-market reports for October and November. And neither will the Fed be happy with an overly quick and overly strong USD appreciation, which might put the inflation target at risk.

"Nevertheless, the Fed will soon withdraw from the expansionary race. As a result, the USD will appreciate, in particular versus the EUR, as the ECB, in contrast to the Fed, is likely to become more expansionary again", says Commerzbank.