Fed Decision Day: Markets Brace for a Hawkish Cut Central banks take centre stage today, with major implications for FX and global risk sentiment.
Key Insight:
➢ Fed set to slash rates by 25bps later today.
➢ FOMC’s latest dot plot to be closely watched.
➢ We are bracing for a “hawkish cut”.
➢ ECB official suggests next move in rates could be up.
➢ Euro struggles for gains ahead of Fed decision.
➢ GBP trading higher as markets await BoE meeting
Market Recap:
The US dollar was broadly stable after data showed job openings climbing to a five-month high, despite a simultaneous uptick in layoffs.
The yen remained weak, allowing GBPJPY to extend its rally toward levels not seen since 2008/09, as markets continue to reassess how quickly the Bank of Japan may tighten policy; Japanese officials reiterated their readiness to counter disorderly moves.
The Australian dollar found support after comments from Michele Bullock hinted that further rate cuts may be unnecessary and even left room for a potential hike. This helped GBPAUD rebound off its October–November lows, a zone that continues to act as firm support for sterling.
In Europe, EURUSD was largely unchanged, with attention on German plans for significant defence spending approvals and renewed budget strains emerging in France.
Today's Market Watch:
The Bank of Canada is widely expected to leave rates unchanged at 2.25% following its two recent cuts, making today’s focus squarely on the policy outlook rather than the decision itself. Inflation remains stubborn, growth shows signs of stabilising but at a low pace, and the central bank has limited flexibility to ease further. Any signal that policymakers are more worried about soft demand or external trade pressures could weigh on the Canadian dollar, particularly if the Federal Reserve strikes a more proactive tone later in the day.
The Fed is set to deliver its third consecutive 25bp cut, but the real market driver will be Chair Jerome Powell’s messaging and the updated dot plot. Officials remain divided: the dovish wing argues for additional support due to labour-market cooling, while hawkish members are reluctant to ease too far with inflation still above target. With employment data now carrying more weight than the rate move itself, traders will focus on how much further policy may shift. A cautious or hawkish-leaning message would likely keep the US dollar supported.
10th December 2025
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