T-Minus 24 Hours Until The FED Speaks

Posted Tuesday, April 28, 2020 by
Shain Vernier • 2 min read

At press time, we’re about 24 hours away from the scheduled FED Announcements for April. The disclosure of any new policy is unlikely. Nonetheless, the entire financial world will be watching Jerome Powell for clues regarding the American and global economic future. 

With interest rates already at zero, it’s a real long shot to see any changes to the interbank lending dynamic. The key issue will be the exploding FED balance sheet, which now sits around $6.6 trillion. Most analysts will be looking for Powell to suggest that a massive slowing of open market activities is on the way.

As far as the USD goes, no one is expecting rates to be moved off of 0% anytime soon. According to the CME FEDWatch Index, there remains a 100% chance of the Federal Funds Rate holding at 0% until at least March of 2021. Currently, the index also assigns a zero percent chance of interest rates plunging into negative territory.

USD Index In Rotation Ahead Of The FED

Similar to the U.S. indices, June USD Index futures are hovering near the 50% retracement of the March run-up. Values are in consolidation as the FED conducts its first scheduled meeting since the COVID-19 contagion went supernova. 

June USD Index Futures (DX), Daily Chart

From a technical perspective, a bullish bias remains warranted toward the June USD Index. Rates are holding above the Daily SMA and Bollinger MP, a signal that bidders are still committed to this market.

Overview: This week’s FOMC meeting will be the most-watched in a long while. Existing FED metrics have been dismal and consensus projections for Q2 economic growth are dire. Be on the lookout for Jerome Powell to laud the success of QE Unlimited and how it has provided much-needed market liquidity. Phrases like “rebuilding process” and “light at the end of the tunnel” are likely to surface. Hopefully, Powell’s tone will be optimistic as the U.S. and world economies prepare to reopen in mass.

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