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The US dollar is looking stronger across the board and it seems that it has appetite for more. EUR/USD is getting closer to a critical low, the stubborn USD/JPY broke out of range and other currencies suffered losses as well.

Why is the greenback doing more than a comeback? Summary of the latest developments:

  1. Yellen talks about December: No. 1 at the FED said that December is a “live meeting” and that the FOMC thought it could be appropriate to move in December (as they clearly hinted), even though no decision has been made yet. . And she had other  upbeat comments to add in front of  politicians in Washington: labor slack is diminishing significantly and that “employment is going up” in general.
  2. Fischer sees inflation close to target:: No. 2 at the FED  said that we are not that far from a two percent inflation target once the oil stops rising and the dollar stops  strengthening. This is contrary to the consensus that inflation is very far from target. In addition, inflation expectations have remained steady.  He  was also not worried about US deficits, which are “respectable” in comparison to GDP.
  3. Dudley repeats live meeting: No. 3 at  the central bank, NY Fed President Bill Dudley agreed with Yellen that December is a live. While he did say that there is more slack in the job market that the unemployment suggests (a known line from the Fed) he doesn’t seem to have the same doubts he had in August, when he mentioned that  he was waiting for “more compelling evidence” for a rate hike.
  4. Strong ISM Non-Manufacturing PMI: Contrary to the weak manufacturing sector (which showed a loss of jobs), the measure for the  largest US sector, services, was upbeat: the headline and the employment component showed strong activity,  raising expectations for a rate hike. In addition,  the report lifted Q4 growth expectations, with the Atlanta Fed GDP Now figure  rising from 1.9% to 2.3%.
  5. OK ADP NFP: After too many  disappointing figures, ADP’s report for the private sector came out at +182K, as expected. Nothing earth shattering if you look at  pace in the past year, but certainly above the previous two reports.

All this news had a big impact on the  expectations for a December rate hike. It now stands at a clear majority of 56% for a hike according to bond market’s implied probabilities.

More:  EUR/USD – 1.08 key for parity

Here is how EUR/USD is looking now, not far from the lows of 1.0840. Critical support is at 1.0810, which was the post recovery low in July.

EURUSD November 5 lower after Yellen

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