Talking Points:
- The Federal Reserve will raises rates by 25-bps rates on Wednesday, while the Reserve Bank of New Zealand won’t change policy whatsoever.
- The September Eurozone CPI and the July Canadian GDP reports on Friday should inject volatility into the Euro and Canadian Dollar, respectively, at the end of the week.
- Retail trader sentiment[1] are mostly net-long the US Dollar, which portends to more weakness in the coming days.
Join me on Mondays at 7:30 EDT/11:30 GMT[2] for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.
09/26 Wednesday | 18:00 GMT | USD[3] Federal Reserve Rate Decision and Press Conference
The Federal Reserve will raise rates when it meets on Wednesday, with Fed funds futures pricing in a 100% chance of a 25-bps rate hike. The glide path of interest rates have steepened in recent weeks, with investors now pricing in a 77% chance of a fourth and final hike this year in December. The already high expectations for further tightening mean that a rate hike alone won’t be enough to help the US Dollar. Accordingly, attention will be on the updated Summary of Economic Projections, which are due to include 2021 forecasts for the first time. For the US Dollar to rally, the new projections will need to show that the Fed intends on continuing to gradually raise rates through 2019; currently, Fed funds futures are pricing the pace of hikes to slow down to just two in 2019 (June and December).
Pairs to Watch: DXY Index,
