FX Update: FOMC surprises may be tough to come by tonight. FX Update: FOMC surprises may be tough to come by tonight. FX Update: FOMC surprises may be tough to come by tonight.

FX Update: FOMC surprises may be tough to come by tonight.

John Hardy

Head of FX Strategy

Summary:  Fed Chair Powell will have a hard time surprising on the hawkish side as it has little reason to do so, given the improving inflation outlook. But neither will it want to offer any impression of dovishness, as markets are already aggressively pricing inflation to normalize quickly and for the Fed to begin cutting rates. Any market pivot today, therefore, will likely be down to flows based on a different agenda once the FOMC event risk is out of the way, not because of any new message in tonight’s FOMC meeting or Powell presser.

Today's Saxo Market Call podcast.
Today's Market Quick Take from the Saxo Strategy Team

FX Trading focus: FOMC may not move the needle – more USD downside ahead?

The Fed will deliver a 50-basis point rate hike today and will likely do little to pre-commit to coming meetings outside of vague indications of staying on course with some measure of further tightening to ensure that inflation falls. It doesn’t need to surprise on the hawkish side (beyond chest-thumping to implicitly pushback against the market’s aggressive easing expectations out the curve) as recent inflation data has come down more quickly than expected. At the same time, the Fed won’t want to surprise on any guidance on the dovish side as markets have eased financial conditions so aggressively and is already pricing too much Fed easing in the Fed’s own view. On the latter, the explicit pushback would be a (likely) median Fed funds projection in today’s “dot plot” that is near 5.00% at a time when the market has already downshifted the December 2023 FOMC policy rate to 4.32%. I see no reason for the Fed to shift any of its economic projections save perhaps for GDP, especially not in the direction that makes it look too optimistic (better to revise later).

So if the Fed is determined to avoid surprising the market, will the market trade sideways? Hardly likely and the markets and US dollar could yet move sharply in the wake of today’s meeting, mostly simply because the event risk is “out of the way” rather than because it delivers noteworthy surprises. If there is more fuel in the speculative rally of late that extends into year-end as it did last year, this FOMC meeting is unlikely to stand in the way. On the other hand, if long yields pull back higher for reasons entirely unrelated to the FOMC (anticipation of expanding treasury issuance and early positioning for a move higher in long yields/yield steepening next year as the improved liquidity picture of recent weeks (again, driven in large part into year-end by the Treasury drawing down its account at the Fed, a key part of financial conditions easing recently) this could spook risk sentiment and bring a bid back into the greenback.

Watching EURUSD and other USD pairs over tonight’s FOMC meeting and Chair Powell press conference, with low hopes that either delivers significant surprises. But as noted above, the US dollar could yet move sharply on tonight’s meeting, simply as event risks can serve as a hurdle for market participants putting capital to work on new trades – wait for the event risk and then trade on the original intention as long as the event risk brings nothing new. Either way, the technical market bears watching, with any bearish hopes for EURUSD here requiring a solid rejection of yesterday’s CPI-inspired rally and taking the price action back south of 1.0550. To the upside, the next area of interest is perhaps into the pivot highs just below 1.0800 from the June time frame.

Source: Saxo Group

Table: FX Board of G10 and CNH trend evolution and strength.
Watching in coming days/week for a pivot in the incredible run-ups in trades like NZD vs. CAD, GBP vs. CAD, EUR vs. AUD, etc…

Source: Bloomberg and Saxo Group

Table: FX Board Trend Scoreboard for individual pairs.
Between the FOMC meeting tonight and the calendar roll a good time to watch for shifting themes. For now, USD bears in control – note USDJPY teasing the 200-day moving average again as we watch US yields after tonight’s FOMC meeting and over incoming data.

Source: Bloomberg and Saxo Group

Upcoming Economic Calendar Highlights

  • 1330 – Canada Oct. Manufacturing Sales
  • 1900 – US FOMC Meeting
  • 1930 – US Fed Chair Powell Press Conference
  • 2145 – New Zealand Q3 GDP
  • 0030 – Australia Nov. Employment Change / Unemployment Rate
  • 0120 – China Rate Decision
  • 0200 – China Nov. Retail Sales
  • 0200 – China Nov. Industrial Production


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.