Fed Preview: It may take a clearly hawkish tone to drive the USD significantly higher – Scotiabank

USD edges a little lower as markets idle ahead of FOMC. Economists at Scotiabank analyze Greenback’s outlook.

The first move has not always been the right move 

There may well be a lot of FX chop around the headlines but the first move has not always been the right move around recent policy decisions and today may be no different. 

The USD still looks quite fully priced for what may be a broadly ‘status quo’ outcome in terms of policy implications looking into the next few months.

It may take a clearly hawkish tone to drive the USD significantly higher. If not, markets may start to mull how much downside risk developing or potential headwinds (UAW strike, government shutdown) pose for the US economy and the USD in Q4.

See – Fed Preview: Forecasts from 15 major banks, a pause, but the end of rate hikes?