Last night was a mildly hawkish surprise from the FED. Certainly judging by the bond market recently, the hurricanes and recent poor inflation prints had dampened expectations for December. December is in play, and you get the feeling the FED want to continue normalising while they still can, and why not whilst the US is being helped by synchronised growth everywhere else.

The biggest one way trade YTD has been the long EM trade, facilitated by the weak dollar. The dollar appears to be finding a base, and with the FED continuing the cycle, CESIUSD rebounding nicely and the debt ceiling extended to allow issuance for hurricane aid which will mean repatriation of USD this could easily continue. Add that in with seasonality (Q4 normally USD +ve) and extreme short positioning, it even looks likely.

This is already manifesting itself in a bit of EMFX weakness (FXJPEMCS Index ). The market expects this to rebound on fundamentals, but if it doesn’t EEM US Equity looks very precarious, and is due a catch down already (see chart). TRADING SHORT.