USD: analysts expect a hawkish FOMC meeting on Wednesday, the dollar could rise

The surprisingly strong November employment report makes it less likely that the Fed will lower interest rates, and it may look even more hawkish at its Wednesday meeting.

A so-called hawkish Fed is more likely to tighten its policy than to soften it by cutting interest rates or taking other measures. After several cuts this year, the Fed has signaled a neutral stance, where it is on hold but is monitoring economic data.

The 265,000 jobs created last month are an important figure, as the labour market is not expected to slow down, at least for the next several weeks. The ratio was much better than the 186,000 jobs expected.

"The labour market is clear that the Fed should do nothing more. The Fed can now sit down, without having to worry about falling rates, " says economist Ward MacCarthy.

"They are pretty comfortable where things are, and as long as we get a commercial truce, nothing will change," says Diane Swank, economist at Grant Thorntan.

Ian Lyngen, head of fixed incomes at BMO, said that although this is unlikely to happen, the report on the strength of employment raises the question of whether the Fed would consider to raise interest rates in 2020.

"We are expecting awesome end-of-year celebrations, and the job market continues to get ahead and support consumers," says Briggs. "This is the story of 2019, and we end on the same theme: a weak manufacturing sector and a resilient consumer."

Powell should therefore reinforce this message, which could benefit the dollar, and send the EUR/USD pair back down.