What Message Will the Fed Deliver This Week? 

This week’s Fed meeting is in the spotlight for financial markets, especially since many asset prices are already based on the rate cut expectation. A 0.25% cut does look likely, given the tame inflation data like last Friday’s Core PCE. But any excitement from traders might fade quickly if the Fed sounds cautious or less committed to further rate cuts after this one.

This is where the Fed’s “dot plots” for the expected interest rate path in 2026 will become especially important. There may be a noticeable split between the more hawkish and more dovish members of the Fed regarding where rates should sit by the end of next year. The level of disagreement among policymakers could end up being one of the key themes of this December meeting.

There is also a chance the Fed’s message could disappoint traders in risk assets, especially if this week’s rate cut comes with a more hawkish tone from the Fed Chair. Some of the more hawkish policymakers might point to September’s stronger-than-expected NFP print (119k vs 50k expected) or last week’s jobless claims hitting a three-year low as reasons to slow down and take a ‘wait and see’ approach heading into 2026. Ultimately, the tone the Fed sets this week could play a big role in deciding whether markets lean toward a risk-on or risk-off approach in the near future.

In FX, currency movements remain fairly muted, not just ahead of the Fed meeting, but also with several other major central bank decisions coming up from the RBA, SNB, ECB, BOE, and BOJ. The US Dollar Index (DXY) is holding close to the 99 level, as expectations of a Fed rate cut are being balanced out by rising US Treasury yields.

The climb in the 10-year Treasury yield is also weighing on gold, which has slipped back below $4,200. Spot gold is trading near $4,190, with support sitting at $4,160 and $4,030. On the upside, resistance around $4,270 and $4,300 could slow any rebound, standing between gold and a potential retest of its all-time high near $4,400 (currently $4,381).

US crude oil is still trading within the tight $58–$60 range, as markets wait for clearer progress on the Russia-Ukraine peace talks. If negotiations fall apart, oil prices would likely push higher. But if meaningful progress is made and Russian supply shows a likelihood to return to global markets, prices could move lower. For now, traders are keeping oil in a narrow range until there’s a clearer sense of how the talks will unfold.

At the same time, everyone is anticipating the upcoming Fed meeting and Jerome Powell’s press conference (Wednesday in the US, early Thursday for many Asian markets). Stocks, commodities, and currencies are all essentially on pause, waiting for clues about whether the Fed is ready not only to cut rates now, but also how it views the path for 2026.

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