Some investors and traders believe that the Fed may “pivot” and reduce the pace of rate hikes as soon as the November 2nd FOMC meeting. According to the CME’s Fedwatch Tool, traders are 74% sure that the FOMC will hike rates by 75bps. However, there is also 26% chance that the rate hike will only be 50bps. The reasons for a possible pivot have been numerous, including BOJ intervention, BOE intervention, RBA pivot, and the National Bank of Poland pivot. Some traders believe that tomorrow’s Non-Farm Payroll data could be the key to the Fed’s next move. Expectations are for the US economy to have added 265,000 jobs to the economy. If the print is much lower than the expectation, chances are that stocks will move higher and the DXY will move lower (i.e. there is more of a chance of a Fed pivot, which is good for stocks). However, it the print is much higher than expectations, chances are that stocks will move lower and the DXY will move higher (i.e. the Fed will feel more confident in its decision to hike rates aggressively).
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