It looks like the Federal Reserve (Fed) will announce its latest monetary policy decision to a public with relatively calmer nerves compared to a few days ago.

The VIX index eased sharply from last week’s levels on bank relief, gold tanked to $1935 per ounce and indices on both sides of the Atlantic Ocean were comfortably higher on Tuesday.

The pressure on US treasuries eased, as well, and the US 2-year yield is now around the levels it was before Fed President Jerome Powell’s speech to the Senate which spurred the expectation of a 50bp hike for week’s meeting.

But, even though activity on Fed funds futures looks like it finally is pointing at a solid-ish consensus that the Fed should hike rates by 25bp today, no one really knows how much importance the Fed will assess to the latest banking stress, which, in reality, resulted in an uptick in Fed’s balance sheet due to additional liquidity, but which also tightened the financial conditions sharply.

The chances are that the Fed hikes by a final 25bp to stick to their promise to bring the US interest rates to around 5%. But we could certainly forget about a further advance to 5.5-6%.

For equities, a softer Fed and unexpected liquidity is supportive in the short run. For currencies, a dovish Fed would mean a further depreciation of the US dollar across the board. But all that is dependent on how hawkish/dovish the Fed will sound. And the truth is, a Fed decision has barely been this uncertain.

This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD treads water just above 1.0400 post-US data

EUR/USD treads water just above 1.0400 post-US data

Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.

EUR/USD News
GBP/USD remains depressed near 1.2520 on stronger Dollar

GBP/USD remains depressed near 1.2520 on stronger Dollar

Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.

GBP/USD News
Gold keeps the bid bias unchanged near $2,700

Gold keeps the bid bias unchanged near $2,700

Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.

Gold News
Geopolitics back on the radar

Geopolitics back on the radar

Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.

Read more
Eurozone PMI sounds the alarm about growth once more

Eurozone PMI sounds the alarm about growth once more

The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Majors

Cryptocurrencies

Signatures