When is the Fed interest rate decision and how could it affect EUR/USD?


The Federal Reserve will announce its decision on monetary policy at 18:00 GMT.  Jerome Powell will hold a press conference at 18:30 GMT. 

Key notes

The Federal Reserve is widely expected to keep interest rates on hold at the 2.25 - 2.5% range. A lot has changed from the last meeting and today’s statement could be the most important in months. The market has priced in now rate cuts from the Fed for the next months. So, analysts will look for signals that show how ready is the Fed to ease policy. 

“We expect clear signals of rate cuts ahead at Chair Powell’s press conference and expect the dot plot to support that message,” said Nordea Markets analysts. The economic projections from the FOMC staff will also be a key driver of expectations with potential market implications. 

Powell’s press conference will also create volatility across financial markets. There is no clear consensus about what he will say. At ANZ, analysts expect a shift to an easing bias and see a flattening in the dot plot. “Chair Powell is likely to reiterate that the FOMC stands ready to support the expansion. We don’t expect a pre-commitment to ease, but acknowledge there are risks to our view.

Implications for EUR/USD 

Volatility is likely to start rising around 18:00 GMT. Markets reaction to the statement, projections and Powell’s press conference is not likely to be muted or small, like other recent meetings. The outlook and market expectations changed over the last weeks and look more sensitive. A rate cut, not today but soon, is now seen in prices. 

A rate cut today would be a surprise that should send the US Dollar sharply lower. The impact on the greenback will likely be determined by how the FOMC and Powell deal with market expectations. 

If the Fed presents an outlook that represents more fear, lower inflation expectations, points that action may be warranted, etcetera,  the EUR/USD could gain momentum. The immediate resistance is the 1.1215/1.1225 area (20 and 55 daily SMA):  a consolidation on top could point to more gains and a test of 1.1250. If it continues to rise, the next critical level is seen at 1.1305/10. 

On the flip direction, if the Fed does not point clearly to a rate cut and shows an upbeat tone or mentions soft inflation and growth weakness as “transitory”, the US Dollar could receive a boost, particularly if US yields move to the upside. Under a “hawkish” or a “not so dovish” scenario, the EUR/USD could face severe bearish pressure, exposing the weekly low at 1.1180. If it breaks lower attention would turn to 1.1140 that protects 1.1110. 

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, being the interest rate that it will charge on loans and advances to commercial banks. In the US, the Board of Governors of the Federal Reserve meets​ at intervals of five to eight weeks, in which they announce their latest decisions. A rate hike tends to boost the local currency. A rate cut tends to weaken the local currency. If rates remain unchanged (or the decision is largely discounted), attention turns to the tone of the FOMC statement, and whether the tone is hawkish, or dovish over future developments of inflation.

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.

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.

Feed news

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD clings to recovery gains above 1.1350 after EU inflation data

EUR/USD gained traction and climbed to its highest level in more than 10 days above 1.1360 amid the broad-based selling pressure surrounding the greenback. The data from the euro area showed that the annual CPI jumped to 4.9% in November from 4.1% in October, helping the shared currency preserve its strength.

EUR/USD News

GBP/USD rebound appears capped near 1.3330 amid risk-aversion

GBP/USD is making a minor recovery attempt above 1.3300 on Tuesday, as the US dollar turns south again in tandem with the Treasury yields. Renewed Omicron covid variant fears damp the market mood as well as the pound. Focus on covid updates, US data and Powell.

GBP/USD News

Gold eyes $1,800 and $1,806 on road to recovery

The precious metal has staged a decent comeback, as bulls look to recapture the $1,800 mark amid a revival of the Omicron covid variant fears. A flight to safety theme remains in vogue killing the demand for the yields.

Gold News

XRP price on edge of cliff as Ripple faces imminent collapse

XRP price followed the rest of the cryptocurrency market lower over the weekend. The US Thanksgiving holiday gave cryptocurrency traders and investors some early Black Friday deals, but downside risks remain.

Read more

Cyber Monday 2021 Discounts!

Glued to your trading screen on Cyber Monday? Upgrade your skills by signing up for FXStreet’s Premium service, offered at a discount of up to 50%. Fellow traders have already taken advantage of Black Friday profits. What about you? 

Subscribe now!

Forex MAJORS

Cryptocurrencies

Signatures