🇺🇸 United States Dollar Forex Handbook November -updated

CPI falls faster than expected and some think a soft landing could be on...

DERBYSHIRE UK - Updated on Saturday the 12th of November to include an update on the CPI data as well as a revised format that aims to improve its readability.

INTENDED USE - This handbook aims to cover everything a Forex trader needs to know about the United States Dollar in order to better position themselves in the market.

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FEDERAL FUNDS RATE

source: The Federal Reserve

On the 2nd of November, the Federal Funds Rate was hiked by 75bps to between 3.75 and 4.00 percent. This matched the market expectations and also matched the previous hike at the September meeting.

This is the sixth consecutive rate hike and borrowing costs are now at the highest since 2008. During the press conference, Chair Powell commented that the rates will be higher than previously expected.

The next meeting is on Wednesday the 14th of December and the long term outlook is for higher rates although it is likely that rates will be more hawkish than expected.

The Federal Reserve is the central banking system in the United States and policy decisions are made by the Board and the Federal Open Market Committee (FOMC). The Board has seven members and they decide on changes in discount rates. The FOMC has twelve members who decide on the levels of central bank money and the federal funds rate. The FOMC members include all members of the board, the president of the New York Fed and four presidents from the remaining eleven Reserve Banks on a rotating basis.

FOMC STATEMENT HIGHLIGHTS (NOV)

• Recent indicators point to modest growth in spending and production.

• Job gains have been robust in recent months, and the unemployment rate has remained low.

• Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.

• Russia's war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks.

• The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run.

• The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.

• In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.

• In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued in May.

• The Committee is strongly committed to returning inflation to its 2 percent objective.