USD mixed ahead of key FOMC decision – Scotiabank

The US Dollar (USD) is narrowly mixed in quiet trade as investors await this week’s key event—Wednesday’s FOMC decision, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Markets weigh Fed cuts against sticky inflation

"Stocks are churning in tight ranges while global bonds are softer as investors consider fading rate cut prospects outside of the US. European bond yields are up 4-5bps following hawkish comments from the ECB Governor Schnabel with Friday’s jump in Canadian bond yields adding to that momentum."

"The Fed is widely expected to cut rates this week, however, and give markets a little more insight into how a deeply divided policy-making body expects the key rate changes to unfold in the year ahead via updated dots and economic forecasts. More rate cuts are expected in 2026 but markets are having to balance expectations between sticky US inflation and the expected dovish shift in the Fed leadership next year."

""The USD retains a sluggish undertone, meanwhile, and may need to find some hawkish nuggets in the Fed’s communications this week to avoid slipping further in what remains a weak period of the year for the USD overall from a seasonal point of view. The DXY is consolidating on the charts, with a tight trading range (potential bear flag pattern) developing between 98.8 (bear trigger) and 99.2 (short-term resistance)."