The U.S. Dollar is trading in mixed ranges ahead of the Fed decision today at 2PM with Swiss Franc and Pound Sterling being the worst performers thus far.
Overview
Although the expectation is for the FOMC to continue cutting into interest rates, market classes, particularly treasuries, are going to be highly volatile with the potential for “hawkish” commentary from Chairman Jerome Powell’s press conference.
There is heavy pricing-in that the Fed will be slashing rates going forward as we go into 2026 projections. Nevertheless, he appeared to be confident last time that the Fed could be cautious considering economic indicators and that inflation remains at an elevated level that merits reconsideration if price pressures remain. Some strategists explained that the treasury market may be setting itself up for disappointment if Powell impedes validating the market’s aggressive timeline for rate reductions. Meanwhile, the Buck could surprise with an upward swing. Expect strong reaction as Powell delivers his remarks and answers inquiries.
On the trade front, there are good developments ahead of tomorrow’s meeting in South Korea between China’s President Xi Jinping and U.S. President Donald Trump. The latter said that a trade deal would be finalized with the host country, that China’s tariffs on pharmaceuticals would be cut, and the possibility that Nvidia can start selling its highest-end microchips to the world’s second largest economy. For now, the Buck is up by almost 1.0% for October so the next few days will test that strengthening.
What to Watch This Week…
- Bank of Japan meeting and ECB on Thursday
- Monex USA Online is always open
GBP ⇓
The Pound is already down by over half a percent this morning as U.K. investors worry that the government will not be able to deliver on its budget promises after officials report concerned with low productivity. Instead of being able to be expansionary, the next budget is likely to feature tax hikes as well as spending cuts that only threaten to worsen the state of the British economy. The Autumn Budget will be presented on November 26th. Prior to that event, the Bank of England will meet on Nov. 6th and odds are increasing that they will lower borrowing costs. After staying cautious regarding inflationary pressures, there is now a 36.1% chance members agree on cutting.
CAD ⇑
The Canadian Dollar is back to trading at levels seen at the end of September after a bit of a comeback from some multi-month lows. By midpoint in October, the “Loonie” had depreciated by over 1.0% falling to its weakest value against the U.S. Dollar since April of 2025. Part of why the currency has climbed back is the idea that the Bank of Canada may also deliver a “hawkish” message as it makes a decision to cut interest rates. We will know their thinking and reaction to it after 9:45AM.
