Bank of America analysts suggest that the dollar may not show much of a response even if the Federal Reserve proposes to slow the pace of interest rate cuts during its decision on Wednesday.
While the market expects a 25-point rate cut, the Fed could also signal a halt in January. Slower rate cuts would normally support the dollar, but this effect could be mitigated by the Fed's focus on reducing the risks of re-accelerating inflation, dealing with an increase in unemployment, and maintaining a restrictive policy stance.
In addition, a “buy-the-rumours, sell-the-fact” response could emerge, as the dollar has already strengthened on expectations of the Fed's cautious approach to rate cuts.
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I posted earlier on what surprises could be coming out of the Federal Open Market Committee (FOMC) today:
And:
FOMC statement due at 2pm EST, with Powell speaking half an hour later:
