• US Federal Reserve to present the Summary of Economic Projections.
  • The dot-plot will offer some answers but won’t clear all the doubts.
  • The American dollar will continue to trade in regards to the risk-related sentiment.

The Federal Open Market Committee is undergoing a monetary policy meeting and will announce its latest decision on Wednesday. The US Central Bank is widely expected to keep rates on-hold, alongside the hip load of stimulus programs, meant to keep the economy afloat throughout the ongoing coronavirus-related crisis. The focus, then, will be on Fed Chairman Jerome Powell’s statement and press conference, as speculative interest will try to figure out what could policymakers do next.

Stimulus and more stimulus

In this particular meeting, the central bank will also present the Summary of Economic Projections, which includes fresh policymakers’ expectations about growth, inflation, and employment. Regarding growth, there are no doubts that the economy will contract this year, although is yet to be seen the extent of it. A mild recovery is expected for 2021, and the Fed will have to continue to support the economy until there are signs of economic recovery.

The unprecedented amount of stimulus pumped into the economy in the last three months may trigger new issues,  including a pick up in inflation. Uncertainty is high, not only about what the Fed could do, but also about how and when the economy could recover, and how COVID-19 will develop in time. Would the world avoid a second wave that will end up worsening the economies even further? Or could a vaccine put an end to it?

Dot-plot to offer clues

The dot-plot could bring some certainties over how policymakers foresee the future of rates and economic indicators. Up to now, the market is expecting rates to remain at the current levels until at least the first quarter of 2021. Any sign that rate hikes could take place before that they would be quite a positive clue. The same goes for growth figures. Do policymakers expected a V-shaped recovery or would the comeback will be slow throughout several quarters? Those are some of the questions the market expects the dot-plot to answer.

 The levels of unemployment in the outlook will also gather attention, particularly after the positive surprise from the Nonfarm Payroll report released last week. Is the US economy still in its way to double-digit unemployment or the worst is over? Chief Powell will stress out that uncertainty is high, as he did multiple times over the past few months.  Negative rates are out of the equation, but that’s another possible surprise factor.

Multiple other doubts will persist, but for sure, this meeting will bring some answers, hence, granting action.

Dollar possible scenarios

The American dollar has been on a franc decline ahead of the event, undermined by a better perception of risk. Despite the gloomy economic figures from the last couple of months, the focus shifted to economic recoveries. It will the speed of this last in the eyes of the FOMC that will move the market. Further rallies in Wall Street on an optimistic outlook, will likely keep the greenback under pressure.

Risk-off after the announcement, on the other hand, would favor safe-haven assets, the dollar included. Gold could be the biggest winner in this scenario, as its refugee condition will couple with the excess of liquidity provided by central banks.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

GBP/USD slides to its lowest level since November, eyes 1.2400 ahead of UK jobs data

GBP/USD slides to its lowest level since November, eyes 1.2400 ahead of UK jobs data

GBP/USD drifts lower for the third straight day on Tuesday and drops to its lowest level since November 17 during the Asian session. Spot prices trade around the 1.2420 region as traders now look to the UK monthly employment details for a fresh impetus.

GBP/USD News

EUR/USD falls toward 1.0600 on higher expectations of the Fed prolonging higher rates

EUR/USD falls toward 1.0600 on higher expectations of the Fed prolonging higher rates

EUR/USD continues to lose ground for the sixth successive session, trading near 1.0610 during the Asian hours on Tuesday. The elevated US Dollar is exerting pressure on the pair, potentially influenced by the higher US Treasury yields.

EUR/USD News

Gold price holds steady below $2,400 mark, bullish potential seems intact

Gold price holds steady below $2,400 mark, bullish potential seems intact

Gold price oscillates in a narrow band on Tuesday and remains close to the all-time peak. The worsening Middle East crisis weighs on investors’ sentiment and benefits the metal. Reduced Fed rate cut bets lift the USD to a fresh YTD top and cap gains for the XAU/USD.

Gold News

SOL primed for a breakout as it completes a rounding bottom pattern

SOL primed for a breakout as it completes a rounding bottom pattern

Solana price has conformed to the broader market crash, following in the steps of Bitcoin price that remains in the red below the $65,000 threshold. For SOL, however, the sensational altcoin could have a big move in store.

Read more

The week ahead: Key economic and earnings releases to watch

The week ahead: Key economic and earnings releases to watch

The market’s focus may be on geopolitical issues at the start of this week, but there is a large amount of economic data and more earnings releases to digest in the coming days. 

Read more

Majors

Cryptocurrencies

Signatures