USD Underpinned Post-FOMC, BoE Next On Central Bank Gauntlet

USD remains underpinned in the wake of the FOMC decision (dot plot tweaks for ’24 & ’25 at hawkish end of expectations, Powell noting potential that r* is higher and a firmer tone re: economic growth), weakness in equities has helped, although the BBDXY failed to breach early September highs.

• JPY has benefited from the broader equity market weakness, after the initial yield differential impulse saw USD/JPY to fresh ’23 highs. USD/JPY now sits at Y148.20, with JPY atop the G10 FX table.
• NOK has benefitted from hawkish adjustments to the Norges Bank’s rate track, which came alongside the signalled 25bp hike. The Bank also alluded to the likelihood of another rate hike, most likely in December.
• Elsewhere, the SEK failed to hold on to knee-jerk gains surrounding the bank’s FX hedging policy, which came ahead of time vs. most expectations. Still, the hedging amount outlined was in line with rough calculations and the upward shift in the Riksbank’s rate path forecast was perhaps a little shallower than could have been expected, even with the Governor pointing to the likelihood of one further rate hike. EUR/SEK trades comfortably off session lows.
• CHF finds itself at the bottom of the G10 pack after the SNB left policy rates unchanged (BBG consensus looked for a hike). While Chairman Jordan pointed to the potential for further hikes and noted that the inflation battle is not yet over, some of the language deployed and the SNB playing down the idea of a hawkish pause has also weighed on the CHF.
• GBP also struggles, with uncertainty ahead of the BoE decision, triggered by yesterday’s CPI data, noted. Cable shows below $1.23 for the first time since April, even with markets once again leaning more towards the idea of a hike later today.