As the dust settles from Tuesday, the United States Dollar is trading weaker across the G10 board this morning ahead of the Federal Reserve’s interest rate decision at 2pm today
Overview
Markets, still, are attempting to digest the implications of a Trump administration and a potential red sweep of congress, keeping traders on their toes as choppy pricing persists for USD. Yesterday’s session was a tale of two halves as the Dollar ran up the score in the morning, but rebounded off its highs though the afternoon to close the day on a more moderate note.
As focus shifts to the next risk event on the table this week – the Fed’s decision this afternoon – it’s all but guaranteed Powell & company will cut interest rates by 25 basis points today. What’s far less certain, however, is any forward guidance from the monetary policy body markets may get. Trump’s victory Tuesday night does bring with it uncertainty on the possible return of inflation, given his proposed tariff policies. Such policies, per policy wonks themselves, could boost the Dollar, but bring with them renewed inflationary pressures. Traders will be very keyed into Powell’s press conference beginning at 2:30 for any hints on a possible December decision, which after Tuesday night markets are now treating as more of a coin flip. Odds of a cut in December are now hovering around 65%, down from 85-95% earlier this week. After this afternoon, the data calendar does take a bit of a breather after an absolutely jam-packed week. The only remaining major data point is November’s preliminary University of Michigan consumer sentiment reading, out tomorrow morning.
What to Watch This Week…
- FOMC Interest Rate Decision, Today 2PM
- U. of Michigan Consumer Sentiment, Friday 10AM
- Monex USA Online is always open
AUD ⇑
The Australian Dollar is the second-highest performer against USD this morning, only trailing fellow commodity-based currency NOK. AUD has very nearly erased the heavy losses it took Tuesday night and yesterday morning through US election results, as traders shift their focus toward the Federal Reserve. The New Zealand Dollar is trading substantially stronger as well following more noise out of China on government stimulus to promote economic growth and prop up the nation’s ailing real estate sector. AUD and NZD are more likely than other major currencies to escape substantial damage from potential Trump administration tariffs.
GBP ⇑
Pound Sterling is a big winner against USD this morning, even after the Bank of England cut interest rates by 25 basis points this morning. Forward guidance from Governor Andrew Bailey, however, leaned a touch hawkish as the central bank emphasized that any moves going forward will be ‘gradual,’ which functionally raises the bar for further easing. Inflationary pressures in the UK have pulled off quite a bit over the last few months, and now look to be close to in line with the BoE’s target. There are further downside risks to inflation persistent in the nation’s economy, but the November and December readings will be crucial.
