It's FOMC day and a 25bp rate cut – which would take the target rate to 3.50-3.75% – is around 90% priced in. The big focus will be the Summary of Economic Projections (SEP), the number of dissenters against the 25bp cut, and then Chair Powell's press conference, ING's FX analyst Chris Turner notes.

Dollar might spike to 99.60 on a hawkish cut

"There's a risk of up to four Fed dissenters, versus one in October, and the Fed probably keeping just one rate cut in 2026 in the SEP. This compares to the close to two additional rate cuts priced in by the markets for 2026. There will also be a focus on growth and the unemployment rate projections, which in September stood at: GDP 1.8% (26), 1.9% (27), 1.8% (28) and unemployment at 4.4% (26), 4.3% (27). GDP is at risk of being revised higher, while projections for the unemployment rate could be nudged higher."

"In October, Powell's press conference sent the dollar sharply higher. Presumably, those risks remain today as he discusses dissent in the decision and the fact that three back-to-back rate cuts have taken the policy rate much closer to neutral. Clearly, the pricing of a second rate cut in 2026 is at risk today and comes during a week when investors are hawkishly reassessing global central bank policy."

"DXY could trade up to 99.60 today on a hawkish cut, but the release of what should be soft jobs data next week and seasonal December weakness suggest that today's dollar rally might not last."