USD mixed ahead of Fed – Scotiabank
18.12.2024, 13:12

USD mixed ahead of Fed – Scotiabank

The US Dollar (USD) is narrowly mixed ahead of the outcome of the Fed policy decision later today. DXY gains through 107.15 should trigger another leg up in the index, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD holds consolidation range ahead of Fed

“US Housing Starts and Building Permits are the only data releases scheduled ahead of the FOMC’s conclusion. A 25bps cut is widely expected but the messaging from the Fed is likely to sound more cautious than the last meeting. Updated forecasts may anticipate stronger growth, higher inflation and lower unemployment.”

“Policymakers are also likely to pencil in fewer rate cuts next year— perhaps only two, down from four in the prior dot plot. A less dovish Fed is already largely factored into the rates outlook—swaps anticipate 71bps of easing through next December, including today’s meeting. Still, a more cautious Fed will likely add to underpinning for US yields and the USD.”

“The DXY is sitting in the middle of its mid-month consolidation range which has adopted the profile of a potential bull flag pattern on the charts. The set up suggests the DXY is coiling ahead of another push higher. Technically, DXY gains through 107.15 should trigger another (1% to 1.5%) leg up in the index. Support is 106.60.”

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