Synopsis:

Bank of America expects the November FOMC meeting to have limited market impact, with a 25bps rate cut already priced in and Chair Powell likely to remain optimistic but non-committal. With the US election looming, FX markets are primarily focused on election-driven risks, with December’s FOMC viewed as a more consequential event for the USD.

Key Points:

• Rate Cut Expected: A 25bps rate cut is fully anticipated, with little change to the FOMC statement, as the Fed maintains its data-dependent approach.
• Election Overshadowing FOMC: The November meeting is likely to be overshadowed by the election, seen as the biggest factor for market direction in the near term.
• USD Resilience: Despite recent softer US employment revisions, the USD remains resilient after a strong October rally (DXY +3.17%) driven by robust economic data, positioning, and dovish signals from abroad.
• Press Conference Watch: Powell’s tone will be closely monitored, though a dovish surprise or signal of a pause is unlikely. Any hint of a future pause, however, could be USD supportive.

Conclusion:

BofA views the November FOMC as a minor event in the context of upcoming US election outcomes, with any reaction likely short-lived. With strong recent US data, the USD appears well-positioned to stay resilient, and market focus will soon shift to the December FOMC as the next pivotal moment for USD direction.