Jerome Powell releasing a white dove

There is no ambiguity in the market reaction to the Federal Reserve statement.

The dot plot was moved towards market pricing, which is essentially validating it rather than pushing back against a market that was pricing in 114 bps in easing next year. The Fed took down the 2024 dot to 4.6% from 5.1%, which is 50 bps in easing.

So why is the market now pricing in 127 bps easing? Because there's a bit of a dance that goes on between the Fed and the market. The market always pushes harder than the Fed. At times the Fed pulls back on the reigns to steer the market but by moving towards the market this time, it's a nod that the market is moving in the right direction.

This is a dynamic that I highlighted earlier this month as I noted that the market-Fed reaction function has changed.

The US dollar is down around 50 bps across the board on this:

EURUSD 10 mins Dec 13
EURUSD 10 mins

Elsewhere, US 2-year yields are down 17 bps to 4.56% while 10-year yields are down 12 bps to 4.09%.

The S&P 500 and the Nasdaq are both up 0.6%.