Volatile times ahead for the dollar

All eyes within the online Forex trading market have been focused upon the performance of the dollar in relation to the recent interest rate hike enacted by the Federal Reserve. What is interesting to note is that many investors expected the value of this currency to strengthen significantly when compared to major counterparts such as the pound and the euro.

After a short and somewhat disappointing rally, the dollar has failed to exhibit any real strength. Many Forex analysts believe that this lack of upward momentum signals the continued sensitivity of this currency; particularly in terms of the final two weeks of 2015. However, there may be another reason why the dollar is failing to perform even while the price of commodities continues to fall.

More Base Points

There is no doubt that the rise in interest rates was the key news story this week. It is still interesting to note that one piece of information had hardly been mentioned at all. We are referring here to the supposed 100 base points that the Federal Reserve said it would add to rates during 2016 (a predicted 25 points a quarter). Although this may not be altogether surprising, the fact that it is well above the forecasts of many online forex traders is significant in and of itself.

In fact, predictions still claim that rates will only be raised by 50 bps during the next year; half of what the Federal Reserve announced. When we keep in mind that the bulk of current currencies are associated with zero and even negative interest rates, the difference becomes clear.

All eyes will therefore be focused upon the volatility that traders can expect in the first quarter of 2016. While there is still money to be made, it is likely that investors will continue to take a more conservative approach.

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