Top FX Headlines: Preview for September FOMC Decision & Outlook for USD-pairs

Commentary, Forex, News

Talking Points:

– Low volatility persisting across USD-pairs ahead of FOMC meeting; DXY Index continues its drift lower away from its daily 21-EMA.
– Key feature of today’s FOMC rate decision will be whether or not the balance sheet normalization process commencement is announced; if so, the US Dollar may find some desperately needed support.
The most important event of the week for the US Dollar – and all of FX markets – comes today when the Federal Reserve meets for its September policy meeting, one of the four meetings per year that produces a new summary of economic projections (SEPs) containing the infamous ‘dot plot,’ as well as a press conference from Fed Chair Janet Yellen. As it were, the Fed, like the ECB, BOE, and RBNZ, in an effort to become transparent, has become predictable: they will only make a major policy change (i.e., hike rates) with justification in hand and an opportunity for Chair Yellen to explain to markets why they made their decision.
Today’s meeting will not bring a rate hike, however. Fed funds futures are pricing in exactly a 0% chance of a 25-bps rate hike after all. Accordingly, whether or not the Fed uses this meeting to announce the implementation of their balance sheet normalization strategy, which was outlined at the June meeting in the “Policy Normalization Principles and Plans” augmentation.

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