USD Index: Limited upside and lingering downside risks in the near-to-medium term – Scotiabank
13.12.2023, 13:36

USD Index: Limited upside and lingering downside risks in the near-to-medium term – Scotiabank

The USD is trading higher ahead of the Fed meeting. Economists at Scotiabank analyze Greenback’s outlook.

The FOMC decision may give markets another jolt of volatility

The FOMC decision may give markets another jolt of volatility before things start to settle down ahead of the holiday period.

Another hold is all but a foregone conclusion and, after unchanged policy since July, that should be enough to convince markets that the tightening cycle is over.

There are unlikely to be any concessions to easing in the policy statement, particularly as financial conditions have eased since the Fed’s last policy decision. But it may be tweaked to reflect the fact that rates are very unlikely to move any higher. Changes to the Dot Plot and forecasts in the SEP will matter as much as anything else today; the last dot plot anticipated 50 bps of cuts in 2024 from a higher ending point than looks likely now so adjustments here could look a little dovish.

Broader price patterns are still shaping up bearishly for the USD via the DXY charts which suggests limited upside and lingering downside risks in the near-to-medium term.

 

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