Sanitation: Markets riddled with anxiety on almost-Fed day

Morning Bid Europe

A look at the day ahead in European and global markets

By Ankur Banerjee, Asia Finance & Markets Breaking News Correspondent

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Markets are getting anxious about the U.S. monetary policy outlook ahead of an expected rate cut from the Federal Reserve this week, with a divided central bank and the prospect of a dovish successor to Fed Chair Jerome Powell keeping investors on edge.

Welcome to almost-Fed day! Traders are all but certain that a 25 basis point rate cut is on its way on Wednesday. But let's be honest, the focus is on what Powell will say and how many rate cuts the dot plot will lay out for 2026.

Today's Market News

Semi-hawkish tone expected

Renovations continue at the Federal Reserve Board building in Washington, D.C., U.S., November 14, 2025. REUTERS/Elizabeth Frantz

Markets are predicting 77 basis points of easing through the end of 2026, meaning two more cuts after December remain in the price.

The broad expectation is for a semi-hawkish tone from the Fed this week, cautioning the bar for next rate cut will be higher. So anything that even sounds vaguely dovish will be a surprise and could lead to a bout of volatility.

Bond investors, though, are positioning for a shallow easing cycle, reducing their exposure to long-duration Treasuries and rotating into intermediate maturities for juicier returns.

White House economic adviser Kevin Hassett, a top candidate to succeed Powell, said in an interview that the Fed should continue to lower interest rates, adding yet another layer of complexity to what is likely to be a complex Fed decision day.

The broad consensus among analysts is that if Hassett is appointed as the next Fed chair, he will keep his dovish hat on, but markets are not so certain, Reuters Open Interest Markets Columnist Jamie McGeever writes.

Lacklustre opening for Europe

The skittish mood has meant stocks are mostly trading sideways and European futures indicate a lacklustre opening is on the cards, although chip stocks might be worth keeping an eye on.

The United States will allow Nvidia's H200 processors, its second-best artificial intelligence chips, to be exported to China and collect a 25% fee on such sales, President Donald Trump said on Monday.

Elsewhere, the Australian dollar was choppy after the country's central bank kept rates steady as expected.

The yen was steady after a bout of weakness immediately as news filtered in of a powerful earthquake hitting Japan. Thankfully, the impact has been limited as Japanese authorities lifted tsunami warnings.

Graphics are produced by Reuters.

Key developments that could influence markets on Tuesday:

Economic events: Germany exports and imports data for October

Graphics are produced by Reuters.

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