Realistically, the Fed realistically has one of two options this week, and neither bode well for the US Dollar.
The first option would be for the Fed to raise rates, and announce that it would not do so again until its inflation half of the dual mandate is met. FX markets continually discount future policy actions, and an indication that the Fed wouldn’t be looking to raise rates any time soon would undermine the US Dollar.
The second option would be for the Fed to not raise rates at this meeting, and at the moment, markets are pricing in December as the most likely period for the first rate rise (per the Fed funds futures contract). A meeting that unfolded in this manner could conjure memories of the March FOMC meeting, in which the US Dollar depreciated sharply after the Fed bluffed the beginning of its normalization process…View full article