Credit Suisse discusses the USD outlook around today's FOMC policy decision.
"What would constitute a USD-positive FOMC surprise? In our view, this would require the Fed to send a message that suggests it is almost entirely focused on taming current high inflation and sees no benefit in slowing its hiking pace until there is evidence in actual data (as opposed to market expectations or surveys) that inflation has peaked and is falling. Such a message could force the market to lean towards a 75bp hike in December too...Under this scenario, we can imagine EURUSD targeting 0.9750 at a stretch, with downside beyond that held in check by the proximity of the Oct employment data on Friday," CS notes.
"As for a USD-negative surprise, the more variables the Fed puts on the table as worthy of concern (e.g., international conditions) and the more reasons the Fed states as possible reasons to slow rate hikes, the worse that is for the greenback...In the extreme case, we can see this leading to a fresh test of October EURUSD highs near 1.0100, though we would anticipate the move to peter out given the imminent data risk linked to Friday’s Oct employment data," CS adds.