The US dollar moved slightly on Tuesday ahead of the Fed’s policy decision, with the market almost certain to expect a 25 basis point rate cut. Market attention is now focused on the dot plot and policy guidance for 2025, while investors are also watching JOLTS data and the small business sentiment index.
Bond markets showed investors were increasingly skeptical that Kevin Hassett, the leading candidate to replace Powell, would continue the dovish policies President Trump had hoped for. The 10-year bond yield edged down after three days of gains to a near three-month high.
The euro was flat after hawkish comments from ECB member Isabel Schnabel, who said the next move was likely to be a rate hike, not a rate cut. The Australian dollar strengthened after the RBA insisted a rate cut was no longer needed. This indirectly increased expectations that the next move could be a hike.
The yen weakened slightly after initially strengthening after a strong earthquake hit Japan, while the offshore yuan rose after a Politburo statement indicated no new stimulus was in the offing.
In the crypto market, Bitcoin and Ethereum fell nearly 1% each, in line with the cautious phase of global markets ahead of the Fed decision.
