TD warns U.S. dollar set to drop as market misprices Fed rate risk

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeNewsEconomyTD warns U.S. dollar set to drop as market misprices Fed rate riskExpectations that a Fed led by Warsh would move to increase rates this year has lifted the dollarAuthor of the article: You can save this article by registering for free here. Or sign-in if you have an account.TD expects Bloomberg’s measure of the dollar to fall 0.5 per cent if policymakers are all on the same page. Photo by Peter J. Thompson/PostmediaThe United States dollar will weaken if the Federal Reserve leaves interest rates unchanged this week, according to TD Securities.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountHow far the greenback will fall will depend on whether all of the central bank’s decision makers are in agreement with Fed Chairman Kevin Warsh, said strategist Howard Du, who thinks the market is mispricing the risk of rate hikes heading into Wednesday’s policy meeting.“In the case of a rate hold decision with two or fewer dissents, the dollar should see knee-jerk weakness as the event risk premium fades away,” Du said in an interview Tuesday.SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of FP West: Energy Insider will soon be in your inbox.We encountered an issue signing you up. Please try againIf there is no dissent at the July decision “it would be a surprise for the market and suggests Chair Warsh may have managed to achieve some level of consensus-building, which should lead to a relatively larger knee-jerk dollar selloff,” Du said.TD expects Bloomberg’s measure of the dollar to fall 0.5 per cent if policymakers are all on the same page. The dollar gauge traded lower along with oil prices Tuesday after U.S. President Donald Trump played down any possible escalation in the Middle East conflict.Expectations that a Fed led by Warsh would move to increase rates this year has lifted the dollar. That view combined with haven flows buoyed by the conflict in the Middle East has pushed the gauge of the dollar up nearly three per cent since the war began at the end of February. A delivery person displays black market U.S. dollar banknotes for a photograph inside an apartment building in Buenos Aires, Argentina, on Monday, April 27, 2020 Photo by Sarah Pabst/Bloomberg“The current long dollar positioning prices some lingering risk premium of a hawkish Fed outcome for the July meeting,” said Du.Speculative foreign-currency traders, including asset managers and non-commercial players, have added to their wagers on the dollar rising, according to the latest report from the Commodity Futures Trading Commission. They are now most bullish on the greenback since 2015.While “hawkish momentum is building,” TD strategists expect two dissents from Cleveland Fed President Beth Hammack and Dallas Fed President Lorie Logan on Wednesday. Under that scenario, the bank predicts the dollar gauge to slip 0.3 per cent.“Higher oil prices driven by Middle East tensions have increased inflation risks and strengthened the case for a rate hike, but we think more evidence is needed to win majority support,” they said in a note.We apologize, but this video has failed to load.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.