forex FOMC Rate Decision: Volatility Ahead

[Anzo Lim 0]

The headline event risk for the week will be the FOMC rate decision with overnight index swaps pricing in an 85.4 percent chance of a 25-basis point rate cut. However, the market’s ultra-dovish expectations for further easing could be once again cooled by Mr. Powell who has reiterated for the past year that the central bank is on a data-dependent path.

 

What is more telling, however, is how the US Dollar has performed against this backdrop. Despite market expectations growing increasingly more dovish, the Greenback has continued to rise. This suggests that the US Dollar’s appeal as the most liquid currency is rising, possibly indicating underlying premonitions about future market conditions.

 

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