Fed rate hikes are coming, but not this week: CNBC survey
The CNBC Fed Survey indicates that a vast majority of market participants—93%—expect the Federal Reserve to maintain its current interest rate levels during this week's meeting, dampening immediate expectations for a hike. However, the outlook turns more hawkish for the subsequent December meeting, with 76% predicting a shift towards tightening. This pause is significant as it reflects the Fed's cautious approach amid inflation concerns, suggesting potential volatility in FX markets as traders reassess their positions leading up to the key December decision.
Where it sits in our coverage
Our consensus USD outlook remains undefined as it primarily hinges on interest rate developments. The Fed's pause this week aligns with a broader trend observed in recent analyses, but we lack specific currency targets tied to this scenario across our coverage base.
How firms align
With no specific FX targets tied to this survey, our analysis leans on firm dialogue regarding Fed expectations. Currently, major players like JPMorgan are closely monitoring the Fed's signals for directional cues, while Bank of America appears cautious, highlighting the uncertainty surrounding future rate hikes. Refer to our internal /reports/jpmorgan and /reports/bofa for more detailed views.
What the data shows
As highlighted in our recent publications, expectations for the Fed's trajectory are bifurcated with December presenting a distinct pivot point. Further insights can be reviewed in /research/fed-outlook and related analyses to understand specific impacts on currency pairs.
Key takeaways
- 0193% expect no hike this week; 76% anticipate December rate increase.
- 02FX traders should prepare for volatility leading into December’s meeting.
- 03Market sentiment may shift sharply if upcoming inflation data surprises.
- 04Alignment in expectations suggests a cautious approach by the Fed influences market positioning.
Market implications
Next week’s data releases, particularly inflation figures, will be critical to gauge market reactions and positioning leading into December. Key levels for watch include resistance around 1.08-1.09 for USD pairs as traders adjust expectations post-meeting.
Risks to this view
A sudden shift in economic data, particularly robust inflation numbers, could invalidate the current expectation of a December rate hike postponement. Such a shift would pressure the dollar positively against major currencies.
Sentiment by currency
USD+EUR JPY GBPComposite USD score: +0.65
Sources & References
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