“All participants agreed that the committee was in a position to proceed carefully and that policy decisions at every meeting would continue to be based on the totality of incoming information,” stated the meeting minutes from the latest FOMC rate decision, adding, “Several participants noted that an increasing number of district businesses were reporting that higher interest rates were affecting their businesses or that firms were increasingly cutting or delaying their investment plans because of higher borrowing costs and tighter bank lending conditions.”

Financial conditions since the latest decision have indeed eased, and US 10-year treasury yields are at 4.4% after nearly touching 5% a month ago. The latest Fed projections released at September’s rate decision saw Committee members forecast one more rate hike this year; investors today have priced in more than one 25 basis-point rate cut by the June 2024 Fed rate decision.

The USD enters the North American trading session marginally higher against its G10 peers amidst light flow volumes that are expected to slow markedly as we approach the US holiday tomorrow.

EUR/USD entered the North American session largely unchanged to yesterday’s close ahead of Eurozone aggregate consumer confidence data at 10AM this morning. ECB Vice President Luis de Guindos spoke in Frankfurt early this morning, warning “The weak economic outlook along with the consequences of high inflation are straining the ability of people, firms and governments to service their debt,”. Eurozone PMI data tomorrow will shed further light on the state of economic activity.

GBP/USD similarly entered the North American session relatively unchanged to yesterday’s close. The Chancellor of the Exchequer Presented the Autumn Statement just ahead of the open, announcing lower borrowing over the next several years.

USD/CAD enters the North American session higher with the CAD weighed down by a 4% slide in crude oil prices. Yesterday’s core CPI came in a touch below expectations while headline inflation decelerated to 3.1% year-over-year, as expected. Investors have priced out the possibility of any more hikes in this cycle, with over a 25 basis-point rate cut projected by the June 2024 decision.

USD/MXN trades lower into the North American session despite missing expectations for retail sales (2.3% year-over-year versus 3.7% expected). Tomorrow brings inflation data and the release of the central bank monetary policy minutes, with GDP data coming Friday.

USD/BRL is trading similar to its Emerging Market counterparts this morning as market participants await a potential Senate vote on a bill aimed at increasing government revenue and balancing its primary fiscal budget next year. After yesterday’s close, central bank President Roberto Campos Neto stated that the central bank has room to continue lowering interest rates as inflation is well-behaved.