FOMC will set the tone for USD in 2019.

US Dollar Index

ABSR Research: Chart of the Day

Today’s FOMC will be the main market focus as what originally was suppose to be a near rate hike certainty, has now become far less sure. The equity sell off into 10% correction territory and talk of an impending recession has a few analysts saying the Fed might not hike. What almost all agree on however, is that the pace of hikes will surely decline if not halt all together. Outside of the impact on borrowing costs, the real impact for producers could be a weaker dollar and stronger export demand for U.S. commodities. The Chart of the Day is a weekly spot chart of the U.S. Dollar Index. A stronger U.S. economy fueled by record low unemployment and the Feds steady pace to normalize interest rates has pushed the greenback up roughly 10% from the lows this year. Currently our long term trend models suggest the currency should continue to strengthen but fundamentally an end to rate hikes would keep further gains in check and a quarter or two of negative growth would likely push the dollar lower. At a minimum, the dollar headwinds on commodities would soften and potentially blow at the backs of farmers in 2019.

Shawn Bingham, CAIA

Source(s): ABSR Research, Commodity Systems Inc.

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