Richard Franulovich, the head of FX strategy at Westpac, notes the last Fed meeting of the year was mostly notable for Powell’s ongoing attempts to recast the Fed’s reaction function.

“The chair repeated the very high bar for hikes - a “significant” and “persistent” move up in inflation - and downplayed the analogy of the ’98 insurance cuts, citing structural differences in inflation as the key reason they won’t be reversed as quickly. Powell also seemed to tip his hat to the dovish wing, citing several officials who have embraced an inflation overshoot as ‘appropriate policy”.

The USD may be overplaying the newsworthiness of the Fed’s dovish message but regardless, the overarching background is turning less dollar supportive.

DXY seems vulnerable to a break of key support at 97.10 near term.”