Markets have already written the script for the Fed today: a hawkish hold, and an unchanged 2023 dot plot. Any FX action would depend on potential revisions to the 2024 dots, economists at ING report.
FOMC not a huge event for the Dollar
The overall message by the Fed should be supportive of the Dollar: keep the door open for more tightening if needed and do anything to dent the idea that rate cuts are a long way out. However, market expectations appear quite condensed around this script.
The 2024 dots are where there is a bit more room for uncertainty: leaving the 2024 dot unchanged may not be enough to trigger a material USD correction (perhaps leaving USD largely unchanged, if matched with Powell's verbal rate-cut pushback), but higher 2024 dots can translate into another USD leg higher.
Beyond the short-term impact, we don’t expect this meeting to be a game changer for the Dollar, as the focus will remain on US activity data.
See – Fed Preview: Forecasts from 15 major banks, a pause, but the end of rate hikes?
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