FED: 2026 Dot Plot Assumptions See Fine Split On Multiple Cut Prospects (1/2)
Taking into account comments from several FOMC participants since the December Dot Plot projections were released, MNI's compilation of end-2026 funds rates by member is below (A digest of Fed commentary after the December meeting through the FOMC Minutes is here,) As usual there is a lot of educated guesswork involved in placing the 19 dots though we do have a couple of members at both ends of the table who have been pretty specific on their views. 2026 voters' names are in green, and the key theme here is that the bulk of the current voters (9/12) see at least 1 cut this year though there is a fine split (6/6) between those who see 2 or more cuts and those who see 1 or fewer.
- Recall that the median "dot" was at 3.375%, implying rates 25bp lower by year-end from the current rate of 3.625%. We start at the "top" of the table. 6 estimates in the 2025 dots assumed no December rate cut (from 3.875%). Those 6 we think were: Bostic, Goolsbee, Hammack, Kashkari, Logan, and Schmid.
- 3 End-2026 Dots At 3.875%: Of the December "dissenters", we think Bostic, Hammack, and Schmid also penciled in no cuts in 2026 from that level. Bostic said on Dec 16 that he would have preferred to hold rates in December and didn't pencil in any cuts in 2026, which we assume to mean a steady 3.875% rate throughout. Hammack said on Dec 12 that "we've got policy that's in that range of neutral...I would prefer to be on a slightly more restrictive stance". And having dissented at the final meetings of 2025 in favor of a hold, it stands to reason Schmid is in favor of holding through the next year.
- 4 End-2026 Dots At 3.625%: Here we place Collins and Musalem, neither of whom dissented against the December cut when they were voters, but who appear to have a fairly high bar to subsequent cuts. Kashkari and Logan, who do vote this year, could possibly be interchanged with one of the 3.875% Dots but either way they are reluctant to cut this year. Indeed Kashkari said this week he already saw policy as neutral.
- 4 End-2026 Dots At 3.375%: We've placed current voters Barr, Cook and Paulson here, as well as 2027 voter Barkin. The hardest call here is Paulson who has expressed openness to modest additional cuts by year-end should the data cooperate, so could be a notch lower in the table.
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USDCAD TECHS: Bull Channel Breakout
- RES 4: 1.4140 High Nov 5 and a key resistance
- RES 3: 1.4131 High Nov 21
- RES 2: 1.4051 High Nov 28
- RES 1: 1.3939/4016 Low Nov 28 / 20-day EMA
- PRICE: 1.3865 @ 16:35 GMT Dec 5
- SUP 1: 1.3853 Intraday low
- SUP 2: 1.3840 50.0% retracement of the Jun 16 - Nov 6 bull cycle
- SUP 3: 1.3812 Low Sep 23
- SUP 4: 1.3779 Low Sep 22
A bear theme in USDCAD remains intact and Friday’s strong sell-off reinforces a bear theme. The pair has breached an important support at 1.3942, the base of a bull channel drawn from the Jul 23 low. The break highlights a stronger bear cycle and signals scope for an extension towards 1.3840 next, a Fibonacci retracement point. Initial firm resistance to watch is 1.4016, 20-day EMA.
LOOK AHEAD: US Week Ahead: FOMC Decision Dominates, Post Shutdown Data Catch-Up
- Next week’s US calendar is dominated by the FOMC decision on Wednesday, with a third consecutive 25bp cut almost fully priced.
- Expect it to be a contentious meeting however, with many arguing for a pause not least whilst they’re still relatively in the dark on key official data releases following the government shutdown.
- Fed Chair Powell opted for a surprisingly hawkish tone at the late October press conference, highlighting a deeply divided committee on prospects for another cut in December.
- The “fog” had appeared to win out until NY Fed’s Williams, a senior permanent voter, gave unusually explicit guidance on still seeing room “for a further adjustment in the near term”. With no pushback from FOMC members or media briefings, it appears this message has approval from the core of the FOMC which should be enough to see a rate cut this month. The likely catalyst was the further increase in the unemployment rate to 4.44% back in September, although subsequent tracking suggests stabilization and jobless claims data don’t show any signs of deterioration.
- We’ll be looking for the number of hawkish dissents (we’d be surprised if anyone joins Miran dissenting for a 50bp cut) and expect a greater number to object to a cut in the 2025 dot plot, whilst the distribution of dots for 2026 should be in greater focus.
- As for the economic projections, we expect upward revisions to GDP growth but downward revisions to near-term core PCE inflation with tariff passthrough proving less severe than previously feared.
Aside from the Fed, we also receive two months worth of JOLTS data along with other delayed releases as the shutdown data backlog is slowly caught up.
AUDUSD TECHS: Bullish Impulsive Wave Extends
- RES 4: 0.6723 High Oct 21 ‘24
- RES 3: 0.6707 High Sep 17 and a key resistance
- RES 2: 0.6660 High Sep 18
- RES 1: 0.6649 Intraday high
- PRICE: 0.6630 @ 16:32 GMT Dec 5
- SUP 1: 0.6580/6533 High Nov 13 / 20-day EMA
- SUP 2: 0.6517 Low Nov 27
- SUP 3: 0.6466/21 Low Nov 26 / 21
- SUP 4: 0.6415 Low Aug 21 / 22 and a bear trigger
A strong impulsive bull wave in AUDUSD remains intact, having printed 10 consecutive sessions of higher highs. Recent gains have cleared a number of important short-term resistance points, strengthening a bull theme and highlighting scope for a continuation higher. Today’s rally has resulted in a breach of 0.6640, 76.4% of the Sep 17 - Nov 21 bear leg. This opens 0.6707, the Sep 17 high and key resistance. Key support to watch is at 0.6533, 20-day EMA.
