Dot dot dot
With the Federal Reserve’s interest rate decision looming large tomorrow, there is a significant risk that the Fed will fail to communicate sufficiently. Recently Powell and his fellow US rate setters have been reluctant to commit verbally to how they see the outlook for near term interest rates. Simultaneously, they have also been dissuading the market from reading too much into the closely watched ‘dot-plot’. Therefore, it could be time for the Chair to start talking and stop the dots from driving the show.
There is a near unanimous expectation for the Fed to keep rates on hold tomorrow. Observing market pricing and analysis, it would be remarkable for the Fed to take any action. If the Reserve still provides no clarity on its expected rate normalisation path, the market will have to navigate further economic uncertainty. Meanwhile, the looming threat of workers’ strikes and a potential government shut down will compound economic uncertainty with supply side and fiscal concerns respectively.
As we observed last week with the ECB, short term rate expectations are still a major driver of spot pricing. It would be hard to imagine the FOMC setting out a roadmap for policy normalisation that might undermine current rate expectation. Therefore, Wednesday’s decision is unlikely to be the catalyst that pushes the Dollar back down from its current highs.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – Oil Price
Humphrey Percy
Fri 2 May 2025
Oil Price Pre TT or Trump Tariffs, the oil price seesawed around but mostly reverted to its mean over a few trading sessions unless a major piece of economic, political or trade news arose. All that has gone out of the window with steady declines in session after session, so in case you have been […]
Daily Brief – Stagflation USA
Humphrey Percy
Fri 9 May 2025
Stagflation USA This is the spectre confronting Federal Reserve Chair Powell and the wider USA. It is unusual simultaneously to have both rising unemployment and higher prices with the consequence of rising inflation, but that is where the USA stands today, in the face of the TT or Trump tariffs. Unsurprisingly, despite POTUS offering his […]
Daily Brief – Asia on Fire
Humphrey Percy
Wed 7 May 2025
Asia on Fire The TWD or Taiwan Dollar has scarcely featured in most FX traders’ consciousness until the past four weeks, when the NTD has roared up over 10%. The Korean Won has managed a respectable 6%, the Thai Baht and the Malaysian Ringgit 5% and the Singapore Dollar 4%. So what’s behind it? The […]
