FOMC November Meeting Preview: Markets holding their breath for a Fed pivot FOMC November Meeting Preview: Markets holding their breath for a Fed pivot FOMC November Meeting Preview: Markets holding their breath for a Fed pivot

FOMC November Meeting Preview: Markets holding their breath for a Fed pivot

Charu Chanana

Market Strategist

Summary:  While a 75bps rate hike is baked in for the November meeting, it’s the pivot expectations that need to get a make-or-break acknowledgement from the Fed. This means focus will be on whether the Fed keeps the door open for another 75bps rate hike at the December meeting (hawkish), pushing out of Rate cut expectations from next year (hawkish) or concerns from global financial stability (dovish). The US dollar has reversed 3-4% lower from its cycle highs, suggesting room for gains if we see a hawkish surprise. The bar isn’t too high.

Market participants are looking beyond the November rate decision for this week’s FOMC policy meeting. A fourth consecutive 75bps rate hike seems to be well expected, but the hopes of a pivot have seen markets rally in October and is really the key debated issue this week. There have been hopes that the Fed will signal smaller hikes from December and prepare the ground for rates to peak and pause at 4.5-5.0% in 1Q23. Reasons behind this include some softening of stance from other global central banks such as the Reserve Bank of Australia (RBA), Bank of Canada (BOC) and the European Central Bank (ECB). Liquidity stress emerging in the Treasury market has also been touted as one of the reasons for the expectations. The US Treasury Department plans to issue USD550bn in debt in 4Q22, more than the USD400bn estimated in August.

We think the following key points will be key at the November policy meeting from a markets perspective:

December rate hike talk

Dovish expectations that have been set in currently include Powell clearly guiding for a 50bps rate hike in December rather than a 75bps. We believe this will be premature, and at best what we can get is Fed to become data-dependent. Anything that even keeps the possibility of another 75bps rate hike open at the December meeting will be a hawkish surprise.

Terminal rate projections

Terminal rate forecasts are currently the largest driver of US yields. As expectations of terminal rates surged above 5% at one point in October, 10Y US yields tested cycle highs. That probably was a trigger for the Fed to use the whisperer and convey peak hawkishness in an October 24 WSJ article which first mentioned the idea of the Fed downshifting to a path of smaller rate hikes. But easing of financial conditions since then has possibly again made the central bank uneasy. This gives us a sense that the Fed is uncomfortable with an over 5% terminal rate being priced in, and we are still close to that level at 4.96% currently. But we still have more than two full rate cuts priced in by the markets for 2023, and that is where the Fed can still push back. If the Fed makes a clear case of rates staying at the peak until late 2023, that will be considered hawkish in our view, and result in risk off again.

Concerns around financial stability

With the economy still holding up well, there is little concern yet that Fed’s rate hikes will break anything in the domestic US economy. Instead, any risk of breaking things is still in the global financial markets. Too much focus on financial stability also risks shifting expectations to a Fed pause, and may be considered dovish.

Inflation and unemployment

There would be no update to the dot plot at the November meeting. It is right to consider that the Fed will have to slow the pace of rate hikes at some point. But is a softer inflation a necessary condition to reach that stage? Or we need to just wait for inflation to stop getting worse, even if it takes time to actually go lower. The core CPI and PCE data reported recently continues to show that inflation remains uncomfortably high, and any indication of commitment to still bring that down to much below 3% might potentially require a much higher unemployment rate and possibly much more pain in the financial markets.

Market impact

The US dollar is 3-4% off its highs amid these Fed pivot expectations. With dovish expectations having set in, there is potentially room for the USD to surprise on the upside. That would mean EURUSD back below 0.98 and USDJPY taking another go at 150. USDCNY also would be poised for a move to 7.40 unless these rumours of China considering an exit from its Zero Covid policy by March 2023 prove to be true.

However, if these dovish expectations were to materialize, we could see EURUSD heading to 1.02 and USDJPY down at sub-145 levels. While the Japanese yen may sustain these gains as yield differential pressures start to ease, EUR may have a tougher time holding on to the recovery as room for ECB rate hikes is also decreasing and the energy crisis can only get worse from where we are in this winter.

The most ideal reaction for the equity markets will be to stay in a sideways trend. With markets eager for any bullish trends, the risk of a technical rally remains if the Fed clearly closes doors for any more 75bps rate hikes from here. However, if the markets rally too hard on any Fed communication, we will likely see a host of Fed speakers in the coming weeks trying to clarify and assert that the Fed maintains a hawkish stance, as easing of financial conditions isn’t what the Fed wants right now. The market moves need to remain orderly for the Fed to achieve its inflation goal, else any hopes of a Fed pivot will continue to be smashed.


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 is not intended to and does not change or expand on this. 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 (
- Full disclaimer (
- Full disclaimer (

Boulevard Plaza, Tower 1, 30th floor, office 3002
Downtown, P.O. Box 33641 Dubai, UAE

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.