The firm argues that the Fed will not want to fuel interest rate cut speculations any further in today's communication with Powell "likely to emphasise how important it is to leave interest rates at a high level for long enough”.
That being said, the economic projections will be a crucial point for markets to focus on. Commerzbank expects the Fed to signal "more significant cuts" via the dot plots and that could be one that triggers a notable market reaction in the aftermath. In that lieu, the firm says that the Fed even looks likely to cut faster than the ECB as the US disinflationary process seems further advanced than in the euro area.
As things stand, markets have only priced in a full rate cut by the Fed for May next year while for the ECB, it is for April next year. So, there are definitely some tail risks for the dollar if there is some adjustment to be made on that front.
