Then as we he then as we head into the afternoon, we get core retail sales and PPI out of the US. Not important, not not important and is very, very unlikely to get any movement in dollar. Why is that? Because we have a much more important events, which is going to be the, the the major event of the week and pretty much of the month and the last major major event of 2016. And this is the latest communication from the Fed. Why?

Well, the market is effectively priced in a rate hike. So the market is expecting a point two 5% increase. And I think it's around about 95% because of all the Fed talk saying yet we're heading towards a rate hike in December, because all the data has been generally pretty good. The market has priced that in So unfortunately, if we do get a rate, a rate hike, it is not going to create the bullish price action that we get that that we would get if it was A shock. And that's because the market is expecting this is really important to point out, because we can't buy the dollar on the rate increase because the market is expecting it. It's only if we get a deviation.

Now a deviation could be a positive deviation, let's say it's larger than point two, five. So let's say they raise it by point five to 1%. And that would be a bullish surprise. And we're likely to see the Dollar strengthened, highly unlikely, because the Fed are likely to want to do it very slowly and cautiously. Point two 5% is more than enough. I think the biggest shock would be is if they don't raise rates, because that would go completely against what they've been saying over the past two or three months.

Again, highly unlikely because that would just make them look very silly. It would lose some credibility with the market and I'm sure that they're keen to avoid that. So we are fairly confident that we will get a rate increase, and we might get some volatility around that increase but v Very careful trading it because the market will soon forget about it. Because it's forward looking, it's gone. Okay, you've given us what we expected. Now what is the plan going forward.

So if they don't raise rates expect the dollar to fall because that would be a deviation. If it comes in higher than what we expect, so 1% or more than expect the dollar to strengthen, but if it comes in as expected, expect some volatility, but you don't want to be trading it because that volatility could whip you in and wipe you out. So then the market will as it always does, when it gets what it expects. It focuses in on the communication from the Fed. And the key element here and again, I will update you in the report in terms of what the market expectations are for next year. But 2017 the 2017 rate hike path is going to be critical here with regards to where the dollar goes.

And I believe based on just do my own research. I believe that the market is expecting to Further rate hikes in 2017. Again, if excuse me, if the communication is such that they say we're going to raise rates twice next year, that would be pretty much as expected. It's very, very hard to get a directional bias from that. So that communication says we're happy with how things are going. We are planning to raise rates twice next year, as well as this, this current rate rate hike.

Now that is generally positive, but if it's what the market had anticipated and expected, it's probably not going to set the dollar alight. Now, if they if their rate hike path is more than two, that is dollar positive and should support the dollar as we go into 2017. That's because it's a more it's a steeper rate hike path, which is more positive more money is likely to flow into the dollar because of the prospect of further rate hikes than were expected through trade. 70 the flip side of that is that they could actually reign in. So they could say Actually, we were we were originally planning to rate hikes, but we're only going to do one or we're not going to do any at all, which would be very, very bearish. So if that is the case, remember the market is forward looking, it's been given a rate hike.

Okay, we expected that we're not interested. What's the plan going forward, if they then rein in so less than two rate hikes plan for next year, we could actually see the dollar sell off and sell off quite sharply because the markets going well, we were wanting more, there's no point putting money in dollars, or I'm gonna just close out my positions. It's the end of the year. I've been in the dollar in $1 long position for months and months, months, a very sizable position. This is just the excuse, I need to close it out. And that essentially will cause the dollar to come under pressure, it won't be a change in stance from the Fed because they'll still be fairly positive.

So if they say we're going to raise rates one one time next year, or we expect to raise rates one time next year that's still bullish, but lower than what the market was anticipating. And that could just cause a bit of a sell off on the dollar based on people going, Okay, I'm going to use this as an excuse as we are in the last month of 2016 to close my dollar long positions out, and I'll review things in the early part of next year. So that will be key. Again, I will continue to monitor the situation by doing the usual research and getting a feel for what the market is expecting. But I believe that the dollar reaction is not going to come down to the rate hike. Apart from a little bit of volatility, it's going to come down to the rate hike path in 2017.

And that's because the market is always forward looking and it wants to know what is going to happen in the future. So that's going to be the key thing. And of course, I will keep you fully up to date with the with the various reports as we come into that particular event.