Analysts at Rabobank explained that if the Fed remains resolutely upon its tightening path, dollar strength/oil weakness also threatens to put downward pressure on risky assets.
“The very opposite of the boost to confidence the Fed might wish to deliver by signalling a “return to business” as usual via a gradual normalisation of policy. Note, this presumes the market would be of the view that the Fed is getting ahead of the curve which we assume would be the case in the absence of a pick-up in wage growth.”
“Alternatively, were the Fed to opt to throw in the towel and reverse policy this would certainly weaken the dollar (which one might see as risk positive) but in so far as this would represent an acknowledgement that all of the post-crisis stimulus that was delivered failed to deliver the recovery that had been promised, and given it would make it clear the world is now lacking any obvious growth engine, we see clear scope for additional Fed stimulus proving a negative for risk.”
(Market News Provided by FXstreet)