USD: FOMC to drop dovish hints – ING
31.07.2024, 10:56

USD: FOMC to drop dovish hints – ING

The impact of the Bank of Japan surprise hike was very short-lived in the FX market. We still have to hear from the BoJ governor and see the amount of Japan’s FX intervention before we can turn our focus on the Federal reserve (FOMC) announcement this evening (1900 BST), ING’s FX analyst Francesco Pesole notes.

Fed meeting is nigh

“Rates will be kept on hold today, but there isn’t a clear consensus view on how much Chair Jerome Powell will give away in terms of guidance. Surely, Powell will reiterate a cautious tone on inflation this time, but he has often been the voice of a more dovish faction of the FOMC and the press conference could generate some USD-negative headlines.”

“Our view is that the Fed wants to avoid an unnecessary economic hit, and the loosening jobs market paired with positive disinflation news should be enough for a September cut. The question is whether the Fed will want to use this meeting to prepare markets for a move at the next meeting. Our base case is that they probably won’t offer the kind of clear guidance that would cause a big dollar drop.”

“At the same time, we would not be interpreting slightly more hawkish than expected language today as a clear sign that September should be ruled out: we believe markets will also be reluctant to price that out. The greenback is looking at some downside risks today, but Friday’s payrolls release could be a bigger event for the FX market.”

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