FXTM information and reviews
FXTM
93%
IronFX information and reviews
IronFX
92%
Libertex information and reviews
Libertex
91%
ETX Capital information and reviews
ETX Capital
90%
FxPro information and reviews
FxPro
88%
OctaFX information and reviews
OctaFX
86%
EUR/USD
1.1876
GBP/USD
1.3894
USD/JPY
109.2158
USD/CHF
0.905
USD/CAD
1.2509
EUR/JPY
129.7035

FOMC preview: will sleepy markets be given a Fed wake-up call?


15 June 2021

Since March 2020 the Federal Reserve has been about as accommodative as they could possibly be. On Wednesday at 19:00 BST (Thursday 04:00 AEST), Chair Jay Powell is set to deliver a press conference after the FOMC meeting. However, as the US (and global economy) heals, so too does the need to slowly normalise policy. 

Betting against a dovish Fed is always hard, especially when millions of Americans who lost jobs through the pandemic are still without work. However, given current expectations and a market short of USD’s, could the FOMC meeting indeed prove to be a volatility event for traders?

Key focal points and possible market reaction 

While there's much the market could focus on, here's five core factors that the market will be most sensitive to: 

With the market obsessed with the timeline for reducing (tapering) the pace of its asset purchase program (QE) from its current rate of $120b pm bond-buying (QE) program – how the Fed see the evolution of tapering will be a key focus for market participants. 

Dots to show a hike in 2023. In March we saw 7 (of 18 Fed voting members) voting for a hike in 2023. Can we see another two members switching calls to pencil in a hike in 2023, resulting in the median projection moving to a hike? 

2022 core PCE inflation revisions? We should see a sizeable revision to their 2021 projection of core PCE (personal consumption expenditures) from 2.2% to 2.8% (perhaps even +3%). However, more importantly will be whether estimates for 2022 core PCE is revised higher or lower from 2% and to what extent? 

It’s all about the labour market. Given the US labour market is the Fed’s priority when setting policy, employment trends will be discussed at length in Jay Powell’s press conference – subsequently, any changes to the Fed’s forecasts for the 2021 or 2022 unemployment rate could move markets. The current forecast stands at 4.5% and 3.9% respectively. 

A hike in short-term rates? Will there be a technical 5 basis point (bp) adjustment higher to IORB (Interest on reserve balances) and the overnight RRP rate (reverse repo program)? A complicated consideration, but these guide short-term US interest rates which, in tuns, has a dramatic effect on the USD. 

What’s the trade?

With the market running a short USD position and leveraged funds having pared back shorts in US Treasuries it feels like the risk at the FOMC is slightly skewed to a stronger USD, which could weigh on Tech and Gold. Betting that the Fed will be hawkish (relative to expectations) is always tough, so the preference is to wait for price to push the trade. Here's a few levels I like:

#source

Related

Optimistic Start For Stock Futures

The first trading day of August is starting with positive momentum; both European and US futures are trading higher today. European and US stock indices...

2 Aug 2021

How to Start the Week: Analytics and Forecasts

US consumer spending rose more than expected in June as vaccinations against COVID-19 boosted demand for travel-related services and recreation...

2 Aug 2021

US Dollar Index remains under pressure below 92.00

The index loses ground uninterruptedly since Monday, where it managed to briefly test the boundaries of the 93.00 yardstick. Investors' disappointment at the FOMC...

30 Jul 2021

Weak USD, Gold and China's Stocks Recover

The Fed held a much-awaited meeting yesterday. The bank hasn't made any policy changes and said that although the US economy is making progress, it's not enough...

29 Jul 2021

US Dollar Index looks weaker, breaks below 92.00 to new 4-week lows

The greenback remains on the defensive and now drags the US Dollar Index (DXY) to the sub-92.00 region, or fresh multi-week lows...

29 Jul 2021

Risk aversion ahead of FED

Treasuries have led European bonds higher, as stock markets remain cautious ahead of the FOMC announcement. Risk aversion continues to dominate...

28 Jul 2021


Editors' Picks

© 2006-2021 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.