The Federal Reserve will announce its decision at 18:00 GMT. At the same time, the Summary of Economic Projections projections of FOMC officials will be released, including the “dot plot”. Jerome Powell will hold a press conference at 18:30 GMT.
A 25bp rate hike to 1.75-2.00% is widely expected today, it would be the second rate hike of the year. Markets have already discounted a hike. If the Fed delivers as expected, market participants will focus on other important things. First, are the
Another key factor will be the economic projections of the FOMC staff. “The Fed's projections for interest rates showed a total of three hikes in 2018 in March and is expected to remain unchanged. An upgrade to four hikes, which was very close last time, cannot be ruled out. If they upgrade to four, it is USD positive. Otherwise, it is neutral”, said Yohay Elam, analysts at FXStreet.
The meeting will be followed by a press conference from Chair Jerome Powell. It will be his second post-meeting presser. The media reported that he wanted to have a press conference after every meeting. His comments about that subject, the economic outlook, and the yield curve could influence markets.
Analysts at Danske Bank, expect the Fed to hike without making big changes to the updated ‘dot plot’. “We expect the Fed to update its language by stating that monetary policy ‘remains modestly accommodative’ with ‘modestly’ being a new word reflecting that the hiking cycle has come a long way and we are not far from the level of the longer-run dot.”
Will the Fed signal more than one more rate hike for the rest of
Implications for DXY
A rate hike is fully priced in, so if the Fed remains on hold the greenback could drop dramatically. If the Fed delivers as expected, what the dollar does next is likely to depend on many factors. A hawkish tone would be positive for the dollar and a dovish, negative.
“Risks are largely balanced, but another non-committal press conference from Powell could leave uncertainty elevated.
The US Dollar Index peaked late in May at 95.00, the highest level in six months. Since then it has been moving with a downside bias until it found support around 93.00/30. If the DXY gains momentum, above 94.00 it could rise again to test the 95.00 zone. A break higher could open the door to more gains in the short to medium term. On the flip side, the bearish momentum is likely to strengthen with a slide below 93.00. The next support levels might be seen at 92.70 and 92.30.
About the interest rate decision
With a pre-set regularity, a nation's Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one,
About the FOMC statement
Following the Fed's rate decision, the FOMC releases its statement regarding monetary policy. The statement may influence the volatility of USD and determine a short-term positive or negative trend. A hawkish view is considered as positive, or bullish for the USD, whereas a dovish view is considered as negative, or bearish.
About FOMC economic projections
This report, released by Federal Reserve, includes the FOMC's projection for inflation and economic growth over the next 2 years and, more importantly, a breakdown of individual FOMC member's interest rate forecasts.
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