According to ChainCatcher, citing Jinshi, strategists at Yuxin Investment Research Institute said that after the United States and Iran reached a temporary peace agreement, markets lowered their expectations for another Federal Reserve rate hike, but did not fully eliminate that scenario. As a result, the decline in the US dollar has been limited, rather than matching the movement seen in other assets.
Data from the London Stock Exchange Group shows that markets assign a 68% probability to a 25-basis-point rate increase in December. The same pricing has also fully reflected expectations for action by March next year. In other words, the rate-hike scenario remains present in market pricing and has not been removed from consideration.
The strategists said that a rate hike remains possible, and that this would make the dollar’s decline less pronounced compared with other assets, mainly oil prices. The temporary peace agreement reduced part of the market’s rate-hike expectations, but the dollar remains constrained by how traders price the Federal Reserve’s policy path.