It’s déjà vu all over again for traders as Fed rate hike tilts to December

Currency traders could be forgiven for feeling like they’ve heard this before.
The dollar is echoing its trading pattern from the second half of 2015: Choppy, but tending toward modest strength.
But the buck, as measured by the ICE U.S. Dollar Index DXY, -0.20% isn’t the only market that’s looking strikingly familiar, according to a report from the Institute for International Finance.

Currency traders could be forgiven for feeling like they’ve heard this before.
The dollar is echoing its trading pattern from the second half of 2015: Choppy, but tending toward modest strength.
But the buck, as measured by the ICE U.S. Dollar Index DXY, -0.20% isn’t the only market that’s looking strikingly familiar, according to a report from the Institute for International Finance.
In the chart below, the team at IIF compares the dollar’s performance in 2016 with its performance in 2015:

U.S. equities, particularly the S&P 500 index SPX, +0.42% and the Dow Jones Industrial DJIA, +0.39% have seen similarly low volatility, with the CBOE Volatility Index, commonly known as the VIX VIX, -11.13% averaging just over 16. Credit spreads have also been eerily like their average moves in 2015.


And after a lackluster report on August labor-market growth, investors are looking at an interest-rate hike in December as the most likely path forward for the Federal Reserve. But whether or not these patterns will continue depends on the outlook expressed at the Fed’s September meeting.
“The backdrop for 2016 to date has in many respects been similar to that of 2015: Expectations of sustained low/negative global rates and very gradual U.S. monetary policy normalization,” according to the team of analysts led by Charles Collyns, managing director and chief economist at IIF.
There are also many stark differences in the fundamental backdrop for the global economy. Economists have become more optimistic about China’s prospects, helping lift consensus forecasts for overall global growth.
These factors have been contributing to market performance, helping to lift oil and commodity prices after their sharp decline in the second half of 2015, while also boosting emerging-market equities.
But forecasters who expect the status quo to hold should think again. A shift in the Fed’s outlook could spark a sharp unwind in some of the market’s most crowded trades. The team compares these crowded trades, which include overbought positions in the yen USDJPY, -0.42% crude oil CLV6, -0.52%  and the Nikkei 225 NIK, +0.76%



Click here for Free Signals OR Give A Missed Call : +60350219047 Follow Us On Twitter : www.twitter.com/epicresearchmy Like Us On Facebook : www.facebook.com/EpicResearchMalaysia Need Any Assistance Feel Free To Mail Us at : info@epicresearch.my