Finally, one of the most awaited catalysts is on the table, which never disappoints to trigger volatility in the market. If you are thinking about the FOMC & Fed Fund Rate then yes, you are right. Here’s what to expect from the market today…
Watchlist – Key Economic Events Today
Federal Reserve, the central bank of the United States takes the spotlight as they are expected to release the interest rate decision today. Investors are widely expecting it to result in another rate hike, the third of the year.
Fed Chair Jerome Powell has made it obvious he believes the Fed should continue steadily increasing borrowing costs, and the futures market seems to buy what he’s selling.
Fed Rate Hike – Is It Priced In?
We all know about the Fed’s plan to hike the interest rates in September and December. The investors have already placed their positions to secure the maximum returns in the dollar. So, what to expect on the rate hike?
In my opinion, the rate hike of 2.25% is already factored in. The initial response is likely to be a spike in the dollar and then a sudden reversal. As a second thought, we may see a muted response in the 2.25% release.
However, it’s gonna be an amazing trade if Fed hikes the interest rate by 50 base points to 2.50% or doesn’t hike the rate and keeps it as it is. But the odds are extremely low for this scenario.
Impact of Fed Policy Decision
Interest Rate: Hike to 2.25% (Most likely outcome)
- US Dollar – Sudden spike & then bearish.
- Gold – Sudden dip & then bullish.
- Stocks – Sudden dip and then bullish.
Interest Rate: Unchanged (Most unlikely outcome)
- U.S Dollar – Weaker //Bearish (Massive Selling Expected)
- Gold – Stronger // Bullish (Heavy Buying Expected)
- Stocks – Stronger // Bullish
Later, the investors will focus on the post-meeting release and Powell ’s press conference which is due at 19:30 (GMT), 30 mins after the Fed Fund Rate. Traders are expected to be on the edge of their seats waiting to listen to Powell’s opinions on inflation and wage growth. So, I will also be looking for clues about the next rate hikes, especially what they are planning for 2019.
At 14:30 GMT, the EIA (Energy Information Administration) is due to release the Crude Oil Inventories for the previous week. As per economists forecast, the stockpiles are expected to drop by -0.7M vs. -2.1M barrels previously. However, the American Petroleum Institute reported a build of 2.9M barrels in inventories which is weighing on the crude oil prices. Thus, crude oil is going to face headwind until the release of EIA report today.
NZD – RBNZ Monetary Policy Decision
The Reserve Bank of New Zealand has lately moved to the dovish side, freeing the door to rate cuts down the line. Nevertheless, RBNZ Governor Adrian Orr and his team are unlikely to cut the 1.75% Official Cash Rate just now. So, what’s there for us?
Orr is expected to hold a press conference at 22:00 (GMT) and a repetition of the dovish policy and particularly a hint of an imminent rate cut may weigh on the New Zealand dollar. Stay tuned to FX Leaders economic calendar for the live coverage of the events and have a profitable day!