The main attraction of the week is bound to be the monetary policy decision from the Federal Reserve later on today, which will steer the direction of rates amidst a period of scarce economic data due to an ongoing US government shutdown.
Policymakers have been flying blind over the past month or so, as the release of key metrics on the employment, consumer, growth, productivity, industrial activity and many other fronts was delayed, with the exception being the CPI report of October, delivered late last week.
The print showcased that inflationary pressures failed to make as much headway as forecasters expected (3.1%), rising by a mere tenth of a percent to the 3% level and were marginally higher from last month’s 2.9% reading. In regards to the Core CPI rate, which excludes volatile food and energy prices, fell by 0.1% to the 3% level, validating calls from markets that inflation remains subdued and that Fed policymakers will go forth with more multiple rate reductions.
Evidently, money markets are assigning a 97% probability to the scenario where the central bank slashes 25bps off its key policy rate at today’s meeting, bringing down its target range to 3.75%-4% level and borrowing costs to their lowest level since 2022.
Odds for an additional 25bps cut at the December meeting are currently amassing a 80% chance and more clarity will be provided about the Fed’s future actions from the FOMC’s accompanying statement.
Furthermore, Fed Chair Powell’s speech post the announcement will also be of critical importance for traders as the head of the central bank could give clues about the outlook and possibly validating or disproving the market’s bias.
Technical Analysis
DXY Chart – The greenback gyrates above the $98 area ahead of the Fed’s October rate decision
Resistance: 99.70 (R1), 101.20 (R2), 102.40 (R3)
Support: 98.60 (S1), 97.20 (S2), 96.00 (S3)