Dollar softens mildly in Asian session as markets are preparing for FOMC rate decision in the upcoming US session. Fed fund futures continue to price in 100% chance of easing (-25bps cut at 78.1%, -50bps cut at 21.9%). There is little chance for Fed to upset such firm market expectations even though some policy makers may be reluctant to do so.
A -25bps cut to 2.00-2.25% should very well be priced in. The questions are whether it’s a start of an easing cycle, or just a one-off response to risks. The voting will reflect the split inside the committee. Chair Jerome Powell’s press conference is even more important in framing the cut.
Earlier, former Fed chair Janet Yellen endorsed today’s cut but she “wouldn’t see as the beginning… of a major easing cycle.” Former New York Fed President William Dudley also said “there’s a good chance the Fed won’t be cutting further anytime soon”. Dollar could be given a lift if Powell delivers similar messages today.
Some suggested previews:
