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 – Eastern Europe and Central Asia
Humphrey Percy
Fri 25 Apr 2025
Eastern Europe and Central Asia Between 2010 and 2019 economic growth in this large geographic area averaged 4%. According to the World Bank, that growth will decelerate to 2.5% for the next 2 years and even stripping out Russia that will still be lower at 3.3%. Inflation, weak external demand from the EU, global uncertainty […]
Daily Brief – UK Employment
Humphrey Percy
Wed 16 Apr 2025
UK Employment At 75.1%, employment for people aged 16-64 looks sort of OK depending on what that really means, but it does not alter the fact that there are currently 1.55 million people who are unemployed, or 4.4% of the potential workforce. Another much more significant number, is that there are currently 9.27 million people […]
Daily Brief – British Pound
Humphrey Percy
Wed 23 Apr 2025
British Pound A 7 month high versus USD, and GBP is at present benefitting from the self inflicted wounds that the USA is continuing to suffer, the latest of which is the speculation over whether POTUS will defenestrate the Chair of the Federal Reserve. At the moment, and we choose our words carefully given the […]
