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Tonight, the Federal Reserve will announce its crucial interest rate decision. The market's focus is no longer on whether there will be a rate cut, but rather on whether the cut will lean hawkish or shift towards a dovish stance . This decision will profoundly impact the short-term trends of the US dollar index, risk assets, EUR/USD, stocks, and gold. With a December rate cut largely anticipated, the market will pay more attention to whether the Fed will emphasize future policy caution.

FOMC Preview: Hawkish Rate Cuts vs. Dovish Shift

Tonight's decision is considered the most influential policy event of the year, as both inflation data and labor market signals could change market expectations for an interest rate cut.

Market consensus: The probability of a 25 basis point rate cut has reached 87%-90%. However, since this rate cut has already been fully priced in, the market will be really focused on the dot plot , the Summary of Economic Projections (SEP), and Powell's remarks.

The core PCE price index (2.8%) is above the target range.

ADP employment report shows a divergence in the labor market.

All of this will help drive market expectations: if Powell emphasizes rate cuts but remains cautious about the pace of future easing, the dollar is expected to rebound; if he emphasizes that the pace of future rate cuts will slow, it may trigger a dollar pullback.

US Dollar Index: Poised to Break Through Key Range

The US Dollar Index (USDX) is currently consolidating around the 99.00 support level, and is expected to break out of this range as the Federal Reserve's decision approaches, further confirming the short-term trend.

[USDX, H4 Chart | Ultima Markets MT5]

Hawkish Rate Cut (Bullish Dollar): If the Federal Reserve hints at a cautious approach to future rate cuts or only one rate cut, the dollar may rebound and challenge the 100.00 resistance level.

Dovish rate cut (bearish dollar): If the Fed expresses a continuation of the easing cycle, the dollar index may fall below 99.00 and accelerate its retreat towards 98.00.

EUR/USD Outlook: A weaker dollar supports a euro rebound.

[EUR/USD, H4 Chart | Ultima Markets MT5]

Amid a weakening dollar, the euro/dollar pair is currently consolidating within an upward channel, holding steady in the 1.1650–1.1600 range recently. A dovish stance from the Federal Reserve would support further upside for the euro.

If 1.1600 holds, the euro is expected to continue challenging the upper limit of the channel and move towards 1.1700.

If it falls below 1.1600 , it may fall back to the 1.1500 range .

Key points to focus on today

Today's focus is entirely on the Federal Reserve's decision to cut interest rates in December , and the market will adjust its expectations for the dollar and risk assets based on its tone and dot plot . Other key events :

US data:

NFIB Business Optimism Index (06:00 AM ET)

JOLTS job opening (10:00 AM ET)

Author：Ultima Markets Daily Insight Welcome to the Ultima Markets blog! We share daily market analysis on U.S. stocks, indices, forex, and crypto. Subscribe to stay updated, enhance your trading skills, and learn together with us!

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