Synopsis:

Danske expects a 25bp rate cut from the December FOMC meeting, with attention on updated Fed rate projections and macro forecasts. A dovish outlook could support EUR/USD upward movement.

Key Points:

• Expected Fed Action:

  • 25bp policy rate cut fully priced in by markets.
  • Possible additional 5bp ON RRP facility rate cut, though with limited policy impact.

• Focus Areas:

  • Updated dot plot with likely higher GDP and inflation projections for 2024-2025.
  • Terminal rate view and policy guidance for 2025 under scrutiny.

• EUR/USD Outlook:

  • If the Fed signals multiple cuts in 2025, UST yields could decline.
  • A dovish Fed stance may lift EUR/USD upon the announcement.

Conclusion:

Danske anticipates a dovish-leaning December FOMC meeting, potentially supporting EUR/USD if the Fed signals continued rate cuts into 2025.