FOMC Decision Day: Markets Await Fed’s Next Move

Hello, traders! Welcome to Wednesday trading. The calendar is getting busier, and today’s focus will be on the highly anticipated interest rate decision from the Federal Reserve. But before we dive into today’s key events, let’s review what happened on Tuesday.

Tuesday’s highlight was Canadian inflation data, which delivered a major surprise. CPI surged to 1.1%, significantly higher than the expected 0.6%, signaling stronger inflationary pressures in Canada. The reaction on the market was immediate—the Canadian dollar strengthened sharply, erasing earlier losses and gaining across the board. Overnight, we saw a slight correction, but as we head into Wednesday, CAD is holding onto its gains.

The first major event of the day was the Bank of Japan’s (BoJ) interest rate decision, which brought no surprises. The BoJ left rates unchanged, as expected. Governor Ueda’s comments were largely neutral—he noted that Japan’s economy is recovering moderately and that underlying inflation is gradually moving toward the 2% target, allowing for a slight adjustment in monetary policy. However, there was no indication of an imminent rate hike, leaving JPY movements relatively muted.

Looking ahead, all eyes are on the Federal Reserve’s interest rate decision later today. The market widely expects no change in rates, but the real focus will be on the FOMC statement and Fed Chair Powell’s press conference. Traders will look for clues about the timing of the first rate cut and any adjustments to the Fed’s inflation outlook. Additionally, today will conclude with GDP data from New Zealand, expected at 0.4%.

On the currency market, the Japanese yen and US dollar are showing strength, though the movements remain relatively contained ahead of the Fed decision. On the other hand, European currencies, particularly those from emerging markets, are under pressure, while antipodean currencies (AUD and NZD) are weaker following recent corrections.

Indices are struggling, reversing Tuesday’s gains. The bullish correction that began earlier in the week appears to be losing steam, with European and US futures pointing toward a weaker session. Investors remain cautious ahead of Powell’s remarks, which could significantly impact sentiment.

On the commodities market, oil experienced a major reversal on Tuesday. After attempting a recovery, prices plunged from local tops to local lows in rapid fashion. The failed rebound suggests that oil remains under strong bearish pressure, and unless buyers step in with conviction, we could see further downside. Meanwhile, gold and other precious metals continue their impressive rally. Gold is posting new all-time highs almost daily, and the trend remains firmly bullish as investors flock to safe-haven assets amid economic uncertainty.

That’s the situation as we head into a critical Wednesday session. The market is bracing for the Fed’s decision, and volatility is expected to pick up later in the day. Stay tuned!

Source: https://www.axiory.com/analytics/market-news/fomc-decision-day-markets-await-fed-s-next-move