Ahead of the Federal Reserve’s interest rate decision and Jerome Powell’s subsequent press conference this afternoon, the United States Dollar starts this morning in relatively quiet territory.
Overview
Ahead of the Federal Reserve’s interest rate decision and Jerome Powell’s subsequent press conference this afternoon, the United States Dollar starts this morning in relatively quiet territory. Markets are clearly holding their collective breath, waiting to see if Powell will stick to his previously-announced path of two more rate hikes this year. While a 25 basis-point hike today is all but a done deal, several members of the Fed over the last month have not been able to fully convince traders of either the timing or the mere reality of a second (and likely final) hike to wrap this tightening cycle.
While inflation data out of the US the last few months has been on a continued downtrend, undoubtedly good news for the Fed and the economy as a whole, it’s distinctly possible that Powell will cautiously re-emphasize the need to “finish the job” and reaffirm one more hike this year. The Fed’s “data-driven” approach thus far has proven to be the right one, but equity markets at least are hoping that this hike will be the last one to give them a more sustained upside. Because today’s rate decision is all but baked in the cake, Powell’s press conference will be the big market-mover of the afternoon.
Not to be outdone, the European Central Bank faces a similar decision and press conference tomorrow morning, followed by the Bank of Japan on Friday. Once again, the respective press conferences from these central banks will be the driving force behind price movements rather than the interest rate decisions themselves.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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JPY ⇑
Japanese Yen is posting minor gains against USD this morning ahead of the Bank of Japan’s policy meeting and announcement this Friday. While it’s still extremely unlikely that Governor Kazuo Ueda will make any changes to the island nation’s ultra-loose monetary policy, traders are adding protection in the case of a surprise move.
AUD ⇓
In a sharp reversal from yesterday’s trend, the Australian Dollar starts the morning down more than three-quarters of a percent against the USD after inflation data came in overnight below expectations. While a 6% reading is still twice as high as the Reserve Bank of Australia’s 2-3% target band, this downside reading is raising speculation that the RBA will once again pause its hiking cycle at next week’s meeting. Currently, the central bank expects a return to its inflation target by mid-2025; though this is a longer timeline than other central banks have instituted, Philip Lowe has stated that the RBA is willing to tolerate higher inflation for longer rather than cause damage to the wider economy.
