The US Dollar (USD) has eased back a little this morning, reversing some of the gains seen yesterday, as markets hold on to broader ranges ahead of tomorrow’s FOMC decision. Stocks are narrowly mixed but the overall market mood looks a little more constructive, with global bond yields (mostly) edging lower after yesterday’s squeeze higher, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Fed cut priced in, Powell’s tone in focus

"The AUD is firm, along with the NZD and SEK, but remains within recent ranges; the range cap around 0.6650 may remain intact ahead of the Fed but the market appear to be coiling for a push higher and a test of major technical resistance at 0.6710. A somewhat hawkish tilt developing among global central banks will contrast with the dovish-leaning Fed going forward and weigh on the USD. A 1/4 point cut tomorrow is expected and fully priced in via swaps."

"More impactful for markets will be the tone of the internal policy debate (dissenting opinions), the updated forecasts and dots and how Chair Powell characterizes the committee’s view of the policy outlook. The US data catch up continues this morning with the September and October JOLTS data. The October consensus call of 7115k job openings would suggest some further softening in the labour market from the last reported (Aug) total of 7227k openings."

"The November NFIB Small Business Optimism Index firmed modestly to 99 (98.3 in October). Details revealed a small increase in hiring intentions and a significant increase in plans to raise prices (the largest rise in the diffusion index since Apr 2023). That may make further progress on reining back inflation harder to achieve. Regardless, President Trump is making it clear that he thinks 'immediate' rate cuts are a litmus test for his Fed chair pick."