Fed decision at 6:00 pm GMT will be a test to pivot thesis
Fed monetary policy decision is scheduled for 6:00 pm GMT today and is a key event of the week. Market expects another 75 basis point rate hike. Those expectations are well priced-in and therefore attention will be mostly on what Fed chair Powell will say during the press conference at 6:30 pm GMT. While there was some media chatter about potential 'Fed-pivot', there is no real reason for it - economy remains strong and inflation remains elevated. However, word on the street is that the Fed may decide to slow the pace of tightening starting from the December meeting. From a market point of view, it will not make much of a difference if rates go to 4.5% or 5.0%. What matters more is whether the Fed plans to limit balance sheet reduction or at least will hint on it. If the Fed points to a deteriorating liquidity conditions for the economy, then it would signal a high chance of a pivot and would likely provide support for US500 and other indices. However, lack of such pivot and commitment to current policy may trigger renewed selling pressure on equity markets.
US100 trades around 1% lower ahead of the Fed decision. Source: xStation5
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