FX Daily: Fed hold can hit the dollar today
At a Glance
The desk argues that a Federal Reserve hold at today's FOMC meeting could lead to downside pressure on the U.S. dollar as market participants unwind precautionary positioning. Per the full note from ing-think, the consensus among analysts is pointing towards a hold, despite two dissenters advocating for a rate hike. This scenario implies a correction in front-end USD rates and reinforces the view that declining oil prices will negatively impact the dollar. Current conditions suggest that EUR/USD could be bottoming out, while the likelihood of broad support for year-end rate expectations remains intact.
Key Takeaways
Full Analysis
What the desk is arguing
The desk posits that maintaining the current Fed rate could pressure the dollar lower, specifically as traders recalibrate their positions. According to the source, current market expectations are pricing in a 25-30% chance of a hike, indicating a cautious stance. This suggests a looming mechanical adjustment in USD rates is on the horizon should the Fed opt to hold.
With the Fed anticipated to maintain its policy rates unchanged, the potential unwind of precautionary USD positions should allow the greenback to better align with the signals from dropping oil prices, which have been largely ignored in recent days. The noted dissenters at the Fed, while indicative of some hawkish sentiment, may not be sufficient to prevent a dollar pullback as market narratives shift.
Where it sits in our coverage
Our internal consensus for AUD/USD is currently at 0.7000 (range: 0.6600–0.7300), with goldman forecasting a target of 0.7000 by December 2026 and morganstanley at the same mark. On the contrary, commerzbank projects a more bullish figure of 0.7100 for December 2026.
This view aligns with the prevailing sentiment seen across the currency markets, where several firms are bullish on the outlook for the Australian dollar against the backdrop of a Fed hold. The desk believes that the current spot position and consensus maintain a chance for upside on AUD/USD, especially given market expectations surrounding oil pricing and Fed policy.
How other firms see it
A number of firms are aligned with our view that a Fed hold could negatively affect the dollar, including jpmorgan and goldman, underscoring a shared perspective on potential downside risks. Conversely, firms like bofa dissent, suggesting a more bearish outlook on the AUD/USD pair, believing potential Fed action may lend strength to the dollar.
Market participants should also remain cognizant of the EUR/USD trajectory, particularly in relation to expected ECB actions. Watching these dynamics could shed light on broader market shifts as sentiments around the Fed evolve.
Market Implications
Traders should monitor the EUR/USD pair as it approaches resistance levels. Given the current positioning, any notable movements post-FOMC could indicate a fresh narrative in the market. Additionally, watch for potential implications on AUD/USD as precautionary positions get unwound.
AUD/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Scotiabank | Bullish | 0.7500 |
Bank of America | Bullish | 0.7000 |
Westpac | Bullish | 0.7200 |
From the original
Articles FX Daily: Fed hold can hit the dollar today Published 08:00 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The consensus view for the FOMC today may be a hold, with two dissenters voting for a hike. That might prevent a material downward
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FX Daily: Dollar shrugs off oil sell-off
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