USD: A dovish 25bp cut today is a must - ING

Today's Fed rate decision (1900 BST) is approaching. Markets have recently leaned narrowly in favour of a 50bp cut rather than 25bp, and ING's FX analyst Francesco Pesole thinks that the September FOMC will deliver a 25bp cut, and this may be an exceptionally close call, he notes.

Powell to open the door to larger cuts ahead

"The key risk for the Fed here: Chair Jerome Powell would need to provide solid macro justifications for a half-point move to avoid sounding too sensitive to market rate expectations. Incidentally, Powell would need to show the 50bp cut isn't a 'panic' move: i.e. the Fed is not overly worried about recession and the jobs market."

"We see 25bp as slightly more likely. However, we believe the Fed would accompany a more cautious cut with dovish messaging. That could include a few members voting for 50bp and Powell opening the door to larger cuts ahead."

"A 25bp cut will likely lead to a dollar rally due to a mechanical shift higher in the OIS curve. However, if we are right with our expectations of a dovish press conference by Powell, the dollar may well struggle to hold on to gains beyond the very short-term."