Dollar Mixed Ahead of Fed Decision

The Fed is widely expected to keep interest rates on hold in the 3.75-4% range, but Traders will be closely watching the subsequent press conference from Chair Kevin Warsh for any kind of hawkish messaging. Should Warsh strike a hawkish or more aggressive tone with regard to inflation in his remarks then it could lead to a repricing of rate path expectations, consequently buoying the Dollar, as Traders reassess how high the Fed could ultimately raise rates moving into the new year.

What to Watch This Week…

• Personal Consumption Expenditures - Thursday, 8:30am
• U.S. Gross Domestic Product - Thursday, 8:30am
• Monex USA Online is always open

The complete Economic Calendar can be found here.

CAD

The Canadian Dollar is up against the Buck this morning ahead of the Bank of Canada’s own interest rate decision at 9:45am. Traders are currently pricing in a greater than 80% probability of a 25-bps hike from the BoC this morning, which would mark their first rate hike since July 2023. Despite the widespread expectations, a hike is unlikely to provide meaningful support for the Loonie as any benefit is likely to already be priced in. Additionally, some Analysts are of the opinion that such a move is premature given that Canadian core inflation stands just barely above the BoC’s 2% target.

GBP

The British Pound is down for the fourth consecutive day against the Dollar in the run up to the release of the first budget under Prime Minister Andy Burnham’s government at 8:30am. Chancellor of the Exchequer John Healey, the U.K.’s top treasury official, has indicated that he intends to introduce a modest set of reforms that should prioritize short-term household relief, reportedly including rebates on heating bills and a freeze on fuel duties. These changes will be funded by an increase in taxes for banks, which will reportedly be temporary. Any deviation from fiscal discipline will likely pressure the Pound further.