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

The Federal Reserve will announce its decision on monetary policy today at 19:00 GMT.   Chairman Jerome Powell will read a statement and will hold a press conference at 19:30 GMT. 

Key notes

The Federal Reserve is expected to keep the Fed Funds rate unchanged at the 1.50 - 1.75% range. After cutting interest rate three times in a row, now market participants see no change today and also at the January meeting. Most members of the Federal Open Market Committee (FOMC) mentioned they consider the current stance of policy appropriate. 

Since the last meeting, global economic indicators stabilized and recession fears in the US eased. Last Friday, the NFP report surpassed expectations significantly and today’s inflation data showed the annual CPI at the highest level in a year. Trade concerns remain critical for uncertainty. 

The Fed will also release its updated economic projections and Chairman Powell will hold a press conference. “Most will look at the 'dots' for hints about what the Fed thinks about next year. Given the Fed has cut one more time than it thought in September, it will automatically be lowered but we think the Fed will signal it is on hold also next year. Markets are pricing in another cut during 2020”, explained Danske Bank analysts. 

Implications for EUR/USD 

“For the markets and the US dollar, the key to this FOMC lies in the Projection Materials. Will, the governors, mark down their fed funds estimate for next year to take account of the current 1.75% rate or will they see a brighter future and raise their GDP and rate projections for 2020. This rather straightforward economic analysis will either propel or retard the dollar for the next several weeks,” said Joseph Trevisani, Senior Analyst at FXStreet.

The EUR/USD pair is moving with a bullish bias since the beginning of the week. Following Friday’s sell-off, the euro recovered and approached the 1.1100/1.1110 critical resistance area again. If the greenback drops sharply after the FOMC, the pair could rise to test the mentioned level that capped the upside several times in December. A break higher should clear the way to more gains, reinforcing the bullish outlook. 

The failure of the euro to hold above 1.1100 lead to the correction of the EUR/USD last week. In the case of a decline, immediate support is seen at 1.1065. Below that level, the bearish pressure could increase, favoring a test of the next support at 1.1055. On a wider perspective, the key level on the downside is 1.0990/1.1000: a daily close below would put the US dollar back on the offensive. 

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.