About FOMC meeting

Today’s FOMC meeting is going to be one of the most important market movers in the current month (The statement and Dot-plot will be released at 7 pm (GMT) and the press conference will be held thirty minutes after that). We expect FED to keep the interest rate at the current level which is 2.25%-2.5% but, market has prepared itself to hear some dovish tone from Jerome Powell.

 

CPI and core CPI still has remained below the Federal Reserve’s target and the manufacturing PMI has fallen to 50 which has increased the downside GDP risk.

 

In the last Federal reserve’s Dot Plot which was released in May, the majority of governors voted for maintaining the interest ratetill the end of the year but, four of governors voted for one rate hike in 2019 and two of them voted for two rates hike in 2019. We expect those governors who voted for hiking, shift their opinions to dovish and vote for a rate cut in July or even another one in September, which may boost EURO against the US dollar. On the other hand, President Trump has clarified many times that comparatively lower interest rates for the euro give other countries an advantage over the U.S and he’s increased pressure on the Federal Reserve, specifically on Jerome Powell to stop the QT program. In my opinion, today’s FOMC meeting will not send an aggressive message to the market and even if the FED wants tocut the interest rates for the rest of the year, still the economic situation of the United States is much better than Europe. In the previous day Mario Draghi announced more stimulus could come becausethe EU inflation has muted and still there is no sign of any improvement could be seen from the EU. So, if the FED sends dovish message to the market, the US Dollar may get weak, but, the weakness of the US Dollar will be temporary.

 

Germany manufacturing PMI at the lowest level since 2012

 

Germany GDP Annual Growth Rate at the lowest level since 2014

 

 

The trend of the US dollar index is up. 97.55 is a very important support level.

If the DXY drops below 97.5, it will fall to 96.7 (next important support level) but, if it starts to rise again, 98.1 will be next target. It all depends on today’s FOMC meeting.