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The U.S. Federal Reserve will announce its interest rate decision tomorrow and unless the central bank turns out to be more hawkish than the market is anticipating, it is unlikely to be bullish for the dollar. The financial market is pretty convinced that the U.S. Federal Reserve would increase rates for the fifth time since 2015 and for the first time in 2018. The market is currently pricing a hike tomorrow 94.4 percent probability.
In its January FOMC projection, the Fed forecasted three rate hikes for 2018, after increasing interest rates thrice in 2017. The market is currently pricing the third hike in December with 78 percent probability. If FOMC continues to project three rate hikes for 2018, the probability of the second and the third hike might move up but that wouldn’t be sufficient to push the dollar higher as it has been struggling lately as the focus shifted on policy winding by other major central banks around the world.
