Fed Meeting Could Provide Clues on Future Policy, Will the Dollar Rise?

According to Bloomberg, the FED Chairman Jerome Powell took central bank’s “dot plot” as a guide to apply future interest rates. On the other hand, Wall Street might not be so affected by the Fed’s policy.
US dollar steady ahead of FOMC meeting.

On Wednesday, the Fed will conclude their 2-day meeting which is expected to meet expectations of a second rate hike this year. Fed chairman, Jerome Powell, will begin his press conference 30 minutes after 2 p.m.

The market will focus on the Fed’s clues on its future tight monetary policy as the Fed already applied a rate hike earlier this year. The reason behind the hikes is due to the steady expansion of the US economy. On the other hand, the accelerating growth and inflation might also ignite a more aggressive tightening policy as weak wages increases.

Bloomberg Economists survey predicts that the FOMC will probably stay with its March prediction of three rate hikes this year.

Steven Ricchiuto, chief U.S. economist at Mizuho Securities said: “there is a risk that the dots go up a tad, not down”. “All you need is for one to change. There has been enough strength in the economy”.

Any hawkish comment from Powell can support the US dollar strength as other big economies (Europe, Japan, UK, etc…) are currently a step behind the US economy.

The Dollar index is steady ahead if the FOMC meeting and reaches the 93.80 level. The USD/JPY trades at 110.68, its highest level since May 23rd.


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Masafumi Yamamoto, the chief forex strategist at Mizuho Securities in Tokyo stated that “There are views that the recent emerging markets turmoil could hold back the Fed from quickening the pace of its rate hikes. So the dollar would benefit if the Fed actually signals readiness to hike four times this year”

Masafumi Yamamoto explains why the EUR recently fell by saying that the ECB will probably not willing to hasten any policy normalization and he believes that such expectations are overdone, but also the meeting will disappoint those that expecting for hawkish rhetoric which would explain the euro’s recent weakness.

The euro was trading at $1.1760 at the time of writing. The ECB will hold its policy meeting tomorrow at 11:45 GMT.

This article was written by Marios Athinodorou, TeleTrade’s market analyst, and commentator. Among others, Marios is delivering weekly trading webinars. Sign up for upcoming webinars here.

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