Clarida still to come
The odds of an FOMC rate cut before year-end have fallen to 44% from 50% yesterday. At the start of the week the odds were at 68% but fell after Powell blamed low inflation on temporary factors and indicated that the economy was developing as expected.
What will be interesting is how the market reacts as a cut is priced out. Naturally the dollar will rise but we've seen this week that stock markets liked the idea of a cut, even if it meant slower growth. Continued pressure on stocks, in turn, would create some USD/JPY selling.
Similarly, if you take something like USD/CAD it should be positive but better US growth will spill across the border and means less of a chance of a BOC cut as well, along with higher commodity prices.
Keep a close eye on the front end of the yield curve because that will be the tell.
