FOMC will announce its next monetary policy decision in around an hour, at 7:00 pm BST. Market is expecting the Fed to keep rates unchanged at a meeting today, with money markets pricing in just a 7% chance of a 25 basis point rate hike. While market pricing pointed to a possible hike a few days ago, those expectations were trimmed after lower-than-expected CPI reading for May yesterday as well as lower-than-expected PPI reading for May today, which hints that CPI will continue to drop in the coming months and possibly drop below Fed target during summer.
As the Fed seems to have room to keep rates unchanged today, a lot of attention will be paid to economic projections, forward guidance and whether July hike is still on the table. Markets still see an almost-60% chance of a 25 bp rate hike at the July 26, 2023 meeting. We encourage you to take a look at our decision preview available here.
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Money markets see only a 7% chance of a 25 basis point rate hike today. Source: Bloomberg
The US dollar is pulling back ahead of the decision, being the worst performing G10 currency at press time. Wall Street indices trade mixed - S&P 500 and Nasdaq-100 gain while Dow Jones and Russell 2000 drop. Meanwhile, gold benefits from weaker USD and moves 0.6% higher on the day.
EURUSD managed to break above the resistance, marked with a 100-period moving average, what may hint that the end of a downward correction and return to the main bullish trend is looming. Source: xStation5
While US indices gained recently amid drop in Fed rate hike expectations, situation on Wall Street today is mixed, reflecting uncertainty over future tightening. A dovish message from Fed today could help push US500 above 4,400 pts mark. Source: xStation5
