Price action for broader USD likely to remain driven by month-end flows ahead of tonight’s Fed decision, says Lloyds Bank

Ahead of the Fed tonight, the price action for the broader USD will remain driven by month-end flows, which after the surge in US equities to new all-time highs, is expected to see dollar selling, according to the latest research report from Lloyds Bank.

Markets have effectively priced in a third successive 25bps cut by the Federal Reserve tonight, although economists are a little more divided on the outcome.

If the Fed does not cut, markets will witness a sharp reaction, otherwise the focus will be on the forward guidance post today’s meeting and whether the committee signals further reductions are less likely now, the report added.

Data wise, the first estimate of US Q3 growth is likely to show that, while the economy continues to grow, its pace slowed to 1.6 percent annualised from 2.0 percent in Q2. The detail may also raise concerns that growth could decelerate further as it is likely to indicate a slowdown in consumer spending and sluggish or falling activity in much of the rest of the economy.

Meanwhile, the US ADP employment update will also be watched for clues on Friday’s payrolls but it may be particularly unreliable this month because of distortions caused by the strike at GM.