Today’s FOMC meeting will be a live test of the Fed’s independence, particularly in terms of how much the dynamics of the Fed’s Board of Governors have changed. The US Senate voted 48-47 to approve US President Donald Trump’s nominee, Stephen Miran, to the Fed’s seven-member Board of Governors. Given Trump’s public call for a “big cut”, Miran and the other two Trump-appointed Governors, Michele Bowen and Christopher Waller, will likely vote for a 50-bps cut.
Meanwhile, a US Court of Appeals ruled 2-1 against Trump’s efforts to fire Governor Lisa Cook, affirming her attendance as a voting member at the FOMC. Cook will likely vote with the majority, which the futures market expects will be a 25-bps cut to 4.00-4.25%. Cook’s voting record, like those of Governors Philip Jefferson and Michael Barr, suggested continued alignment with Fed Chair Jerome Powell and the FOMC majority. Her public statements emphasized data dependence and expressed concern that America’s trade policy could increase inflation and negatively impact the labour market, complicating the Fed’s job to achieve its dual mandate.
The other five Fed Presidents will also likely support a cautious 25-bps cut due to the Bureau of Labor Statistics’ revision showing the US economy added 911,000 fewer jobs in the 12 months leading up to March 2025 than initially expected, on top of sub-100k nonfarm payrolls since May.
The DXY Index depreciated to a new year’s low of 96.6, into the lower half of a price channel – currently estimated at between 95.2 and 97.2 – that we identified during its July correction. Whether the DXY can decline further to the floor of the lower channel will depend on whether the Fed delivers a dovish cut. The Fed could, in its Summary of Economic Projections, underscore that policy remains restrictive by keeping the projected Fed Funds Rate above its PCE inflation forecasts, while narrowing the gap between them to signal that the degree of restraint is dialled back.
Overall, the greenback’s recent depreciation has been driven by the diverging policy outlook between the Fed and its global peers. The futures market has priced in the Fed resuming rate cuts from today towards a more neutral rate in 2026. Last week, the European Central Bank signaled that it was content to leave its rates at 2%, the mid-point of its neutral range, after 200 bps of cuts. Tomorrow, the Bank of England is expected to confirm that it will likely delay rate cuts until 2026. While the Bank of Canada is expected to join the Fed in lowering rates by 25 bps today, it is expected to indicate that it is nearing the end of its rate-cutting cycle. The Bank of Japan will likely keep the door open for another hike at its Friday meeting.
Unless the Fed surprises with a hawkish cut, the outlook for the USD remains weak, with profit-taking providing an opportunity to re-establish shorts.
Quote of the Day
“Science is not a collection of facts; it is a process of discovery.”
Robert Zubrin
September 17 in history
Dutch scientist Antonie van Leeuwenhoek was the first to report the existence of bacteria in 1683.
Topic
GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates & Digital Asset)
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.