🌍 Markets Brace for FOMC: Focus on Cut Size and Forward Guidance

🌍 Markets Brace for FOMC: Focus on Cut Size and Forward Guidance

🏦 Key Points

Tonight’s FOMC decision (announcement due 3:00 JST, Sept 18) is widely expected to deliver a 25bp rate cut.

A minority still see risk of a 50bp cut, though this is viewed as politically driven and could raise concerns over Fed independence.

The dot plot revision will be the centerpiece: whether projections shift from two cuts to three cuts by year-end.

💱 FX Market Snapshot

Dollar selling remains in play; EUR/USD trades near a four-year high zone.

USD/JPY is capped in the 147s, lacking clear direction.

If the decision meets consensus (–25bp), risk is for a “sell the rumor, buy the fact” dollar rebound.

📊 Today’s Key Data & Events

🇿🇦 South Africa: CPI, Retail Sales

🇪🇺 Eurozone: Final HICP (Aug)

🇺🇸 U.S.: Housing Starts, MBA Mortgage Applications

🇨🇦 Canada: International Securities Transactions, BoC policy decision (25bp cut expected)

🇧🇷 Brazil: Central Bank policy rate decision

ECB speakers: Lagarde, Nagel (Bundesbank)

U.S.: FOMC decision + Quarterly Economic Projections (SEP)

🇬🇧 U.K. CPI (Aug)

Headline +3.8% YoY, in line with forecasts.

Core CPI +3.6% YoY (slowing), services prices also easing.

GBP steady vs EUR but softer vs USD.

📉 Dollar Index (DXY)

Dropped to 96.58 in Tokyo hours, rebounded to 96.84 in early London trade.

Still at depressed levels but showing signs of stabilizing.

💹 Key FX Ranges (near-term outlook)

Pair Support Resistance Comment
USD/JPY 146.50 148.50–149.00 Highly event-driven; above 149 invites intervention risk.
EUR/USD 1.1650 1.1800 Dollar softness persists; dovish FOMC could push beyond 1.18.
GBP/JPY 197.50 200.00–201.50 Fiscal concerns cap upside, but CPI keeps floor intact.
CAD/JPY 105.50 108.50 BoC decision in focus; break below 106 would deepen downside.
AUD/JPY 96.00 98.00 Driven by AU jobs and U.S./Japan policy outcomes; volatility likely.
NZD/JPY 85.00 87.00 Rate-cut expectations weigh; bias to sell rallies.
ZAR/JPY 8.25 8.50 High yields supportive, but political risks fuel swings.

✅ Strategy Summary

If FOMC delivers as expected (–25bp): Potential for short-term USD rebound on “buy the fact” positioning.

If surprise –50bp cut: Initial sharp USD sell-off, but bond-market reaction could create complex FX dynamics.

Medium term: U.S. labor softness and disinflation remain dollar-negative. EUR, JPY, and Gold likely to stay supported.