USD lifted by short-covering into FOMC – Scotiabank

FXStreet Insights Team FXStreet

Markets are settling into ranges as investors curb risk-taking ahead of the FOMC. Stocks are trading narrowly after yesterday’s US market declines. Bonds are a little softer in Europe while Treasurys are steady. Caution has given the USD a broad—short-covering—lift versus the majors. The main market mover is Turkey where the TRY and local bonds plunged on renewed domestic political risk, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD firmer as markets trade cautiously into Fed decision

"There does appear to be a lot of uncertainty about what the Fed will deliver today. No change in policy is expected but rather more interest will be in how Fed Chair Powell articulates the risks around the outlook as the economy appears at risk of weakening sharply in Q1 amid uncertainty over US trade policy while core PCE remains sticky and inflation expectations have jumped as consumers fret about the impact of tariffs."

"Swaps reflect a little more than 50bps of anticipated easing this year so what the dot plot implies in this respect will be key to how the USD reacts. It’s hard seeing the Fed sound more hawkish at this point but that might be what the USD needs to stage any sort of major turnaround. The Fed is the main event today but the late afternoon release of the January Treasury International Capital (TIC) flows data may warrant some attention."

"Net inflows have been positive, if slowing after a sharp increase in net inflows last September, but December’s data reflected the largest ever one-month net outflow but official (i.e., central banks etc.) accounts from US assets. Earlier, the BoJ left policy unchanged, as expected. More tightening seems likely (possibly at the next policy decision), given rising wages and upside risks to the inflation outlook."

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD edges higher to mid-1.1600s; looks to US PCE Price Index for fresh impetus

The EUR/USD pair attracts some dip-buyers during the Asian session on Friday and recovers a part of the previous day's retracement slide from the 1.1680 region, or the highest level since October 17. Spot prices currently trade around mid-1.1600s and remain on track to register gains for the second straight week.

GBP/USD: Constructive view prevails above 1.3300 ahead of US PCE inflation data

The GBP/USD pair trades on a flat note near 1.3330 during the Asian trading hours on Friday. Traders prefer to wait on the sidelines ahead of the key US inflation report later on Friday. The US delayed Personal Consumption Expenditures Price Index report for September could offer some hints about the US interest rate path.

Gold flat lines above $4,200 mark; looks to US PCE Price Index for some meaningful impetus

Gold struggles to capitalize on the overnight bounce from the $4,175 area, or the vicinity of the weekly trough, and oscillates in a narrow trading range during the Asian session on Friday. Traders now seem reluctant and opt to move to the sidelines ahead of the September Personal Consumption Expenditures Price Index, or the Federal Reserve's preferred inflation gauge.

Pi Network: Bearish streak nears critical support trendline

Pi Network edges lower on Friday for the third consecutive day, approaching a local support trendline. The on-chain data suggests an increase in supply pressure as Centralized Exchanges experience a surge in inflows. Technically, the pullback in PI risks further losses, as the Moving Average Convergence Divergence indicator is flashing a sell signal.

Why the Fed may cut rates in December: Understanding the policy shift

The Fed has gone through a noticeable policy swing in recent months - from initiating a rate cut, to signaling a potential pause, and now shifting once again toward another cut in December. This has created understandable confusion among traders and investors trying to interpret the Fed’s reaction function.

XRP edges lower despite record on-chain activity and steady ETF inflows

Ripple is trading under pressure at the time of writing on Thursday, after bulls failed to break the short-term resistance at $2.22. The reversal may extend toward Monday’s low of $1.98, especially if risk-off sentiment persists in the broader cryptocurrency market.