The U.S. Dollar is trading in mostly tight ranges ahead of today’s 2PM showtime for the Fed as markets eagerly await a decision and explanation of what is to come in the eyes of officials who do not share consensus.
A divided group of Fed members likely means there will be mixed views as well as reaction to the announcement as well as the press conference held by Chairman Jerome Powell. In our view, we believe the Fed will cut by 25 basis points, but it will translate into a “hawkish” reduction since there will likely not be any clarity about lowering borrowing costs further into the future. After all, cuts since September have countered expectations of the Buck sinking by rising instead by over 2.0%.
Geopolitically, the U.S. is trying to assist Ukraine and is asking European leaders to do more to counter Russia. Oil and energy markets are running into trouble coming up with 2026 projections as Russian firms Lukoil and Rosneft get hit with tougher sanctions and face bigger scrutiny. The White House was also considering adding new tariffs, but there were no details on plans after also enjoying progress with China regarding allowing sales of advanced microchips in exchange for a return to purchases of American soybeans. For now, the main item of concern will be the Fed and how it affects 2026’s forecasts.
What to Watch This Week…
- FOMC Meeting 2PM
- Monex USA Online is always open
CAD ⇑
The Canadian Dollar is looking mostly unchanged following the Bank of Canada’s announcement to hold interest rates. Naturally, officials are taking caution seriously after imperative fundamental figures, labor and Gross Domestic Product, came out way better than expected, bringing into question why estimates were so wrong in what they foresaw. As explanations flood, the “Loonie” is more than likely going to appreciate some if confidence is what now carries the narrative for the overall state of the Canadian economy.
JPY ⇓
The Japanese Yen is looking steady ahead of the Fed event as markets prepare for it. Next week’s Bank of Japan meeting is the big buzz around FX circles with traders wondering if the expected hike to interest rates will improve the Yen’s value. Other factors such as improved Business Sentiment and prices for suppliers staying elevated may aid in Yen gaining some ground, but all moves will be quiet until the Fed later. Yen value has dwindled the past month and a half, down 1.5% to the Buck since start of November.
