[MARKET ANALYSIS] USD gives back some post-FOMC strength, whilst the GBP eyes BoE later today

Snapshot: G10s are mostly firmer against the USD this morning, which is giving back some of its post-FOMC strength. The JPY moves higher as traders eye the BoJ tomorrow, whilst the Kiwi benefits post-GDP, which was stronger than expected. DXY soared following the Fed’s decision to lift rates by 25bps. Whilst this was expected, what did come as a shock to markets was the unanimous decision and hawkish dot plot, with the median showing another 25bps hike in 2026. The hawkish meeting lifted yields further beyond the 5% mark, but it does help ease concerns related to the Fed’s credibility/stability. Traders will now await Fed speak as the blackout period gets lifted; Bowman and Schmid are the first scheduled to speak on Friday. Interestingly, MUFG opines that the USD upside should begin to slow down going forward. Analysts suggest that other central banks should begin to turn more hawkish, and deliver hikes later in the year; it highlights that front-end rate spreads do not point to USD buying against any G10, aside from USD/JPY. On the subject of the Yen, the BoJ is set to deliver a 25bps hike at Friday’s meeting. That likely would not be enough to materially strengthen the JPY any further; however, any indication that the Bank could increase the pace of rate hikes would likely do so. (A full BoJ preview can be found in the Research Suite) GBP trades steady this morning vs USD, with all attention on the BoE later today. The Bank is expected to hold Bank Rate at 3.75%, with the vote split likely mirroring the July decision at 6–3. Incoming data since the previous meeting have been mixed but, on balance, supportive of a hold, while the proximity of the Autumn Budget also argues against a significant policy shift or signal at this meeting. Attention will be on whether the Bank tries to push back on market pricing, which currently fully prices in a hike by December.