From Marc to Market:
The dollar is firmer than most of the G10 currencies today, in the aftermath of the FOMC meeting. Fed Chair Warsh repeatedly noted that tightening of financial conditions since the September rate hike. Yet, while recognizing that the tightening does not mean tight, the Federal Reserve stood pat. The market does not believe the Fed, nor have the markets tightened sufficiently to bring inflation to the target, which it has exceeded for six years. Warsh seems to have implied a more gradualist approach to the rate adjustment, though the market continues to recognize a strong chance (~85%) of a hike in December. Without waiting for his task forces to report, Warsh announced there would be seven, rather than eight, live meetings in 2027 and six in 2028. The other meetings will be devoted to strategy.
Attention turns to the today’s ECB meeting and tomorrow’s BOJ meeting. Neither is expected to change policy, but the markets expected rate to be hiked in December. Meanwhile, the earnings news from the AI ecosystem has been mixed. The Philadelphia Stock Exchange Semiconductor Index (SOX) has risen for the past four sessions and settled at a two-week high yesterday. The rolling 30-day correlation between changes in the SOX and Dollar Index turned positive in recent days for the first time since late July....
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