General Market Analysis – 17/09/25

Stocks Drift Ahead of the Fed – Dow Down 0.3%

US stocks drifted lower ahead of today’s key Federal Reserve Bank rate decision, whilst the dollar crashed despite stronger Retail Sales data. The Dow finished down 0.27% at 45,757, the S&P lost 0.13% to 6,606, and the Nasdaq fell just 0.07% to 22,333. Treasury yields pulled further back on the day despite a rally on the data, the 2-year down 3.4 basis points to 3.503% and the 10-year down 1 basis point to 4.028%. The dollar took a hit, with the DXY losing 0.66% on the day to close at 96.66. Oil prices continued to move higher as traders priced in a weaker dollar and increased geopolitical issues, with Brent up 1.56% to $68.49 and WTI up 1.99% to $64.57 a barrel, whilst gold again hit a fresh high just above $3,700, eventually settling up 0.29% at $3,689.98 on the close.

Dollar Looking Vulnerable into the Fed Meeting

The US dollar took a big hit in trading yesterday as FX traders looked to cover the possibility of an outsize cut at the conclusion of today’s Fed meeting, or a more dovish outlook from the FOMC. The dollar index is now sitting just 30 points above the annual low after some key breaks in major currencies yesterday ahead of today’s Fed announcement. The key mover was the euro, which broke higher to hit a 4-year high against the dollar, but support also broke in the USDJPY, which added to the index’s woes. FX traders are now bracing for a lively few days ahead with currencies guaranteed to move. The chance of a 50-basis point cut is now sitting around 10%, but this would certainly see the dollar crash lower to fresh ranges. However, the likelihood is that we see a 25-basis point cut, and moves will come from the forward guidance that we receive from the FOMC. A more dovish outlook will see the dollar move further south, whilst if they remain more cautious, then we could see a sharp correction of recent moves and the dollar push back into recent ranges.

Fed in Focus Today

It is a busy day on the macroeconomic calendar today, with the major event being the Federal Reserve rate decision towards the end of the day. However, there are some other major events scheduled, and although not expected to have as much of an impact as the FOMC, they could see strong moves in local markets. There is little scheduled in the Asian session, but we do have big data due out of the UK soon after the European open. The latest inflation number is due out, with the year-on-year CPI number expected to come in at 3.8%, still well above where the MPC would like to see it. The New York open will see the initial focus north of the border for the Bank of Canada interest rate decision, where they are expected to cut rates by a further 25 basis points. This is followed by the US Crude Oil Inventory data. However, the main event will come towards the end of the session when we at last have the long-awaited cut from the Fed.

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